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| Elisabetta Quadrin |
Our thanks to Elisabetta Quadrini at Turin based brakes specialist Newfren for this insight into the challenges now being faced by manufacturers as we get into a second year of business disruption … one example of the effects that they are having on the motorcycle parts industry …
The third wave of pandemic-induced uncertainty is now having compound effects on the difficulties of doing business in many European markets - not least for manufacturers in Italy at this time.
Elisabetta Quadrini of Turin based Newfren told IDN that effects of the COVID-19 pandemic were already having further negative effects as early as November and December 2020, but that in early 2021 those impacts were mounting - just as the riding season was due to get underway.
She described the cumulative impacts after a year of already having endured the consequences of the pandemic as being "like a river in flood".
"The industrial world is struggling with difficulties of many kinds, a consequence of the increasingly challenging and gradually deteriorating circumstances and trends of trying to produce product and conduct business at this time."
Some of the biggest issues are what Elisabetta describes as the "dizzying increases in raw materials pricing, shortages of materials due to the reductions and cancellations of import services by sea freight contractors (the 'Black Sailings') and the lack of manpower due to illness and lockdown.
"We here at Newfren are very lucky. We are coping well with the problems, but we are encountering all these issues. It is especially frustrating because market demand is still high.
"Last December the prices of raw materials on the metal exchanges skyrocketed as a result of the lower 2020 demand from production industries as speculators started to affect the markets.
"In December 2020, aluminium, as one example, saw an increase of around 30% and, above all, there were not a high number of availability options to source it here in Europe.
"Producers like us are now playing a betting game, like the horse races. We are having to become gamblers and compete against the professional multi-billion euro gamblers who speculate on pricing rising and falling.
"We here at Newfren have an excellent, long-term fiduciary relationship with one of the largest European foundries and have the financial capacity to manage the issues - we have opted to purchase several tons of material in advance, so we are able to hedge our risk.
"But not everyone is as lucky, not all manufacturers in the motorcycle industry are in a position to be able to do this.
"This has secured our price-point and allowed us to manage the costs - although still at increased levels. Above all it has allowed us to manage availability and plan how we feed the production lines and meet the demands of the market.
"We also saw substantial increases in pricing and reductions of availability for the steel we buy in Japan for Newfren brake discs. We have always made sure we use the best possible materials, so again, that was another example of having to invest heavily in advance so we could secure enough raw material to cover anticipated 2021 demand.
"Managing financial resources, even if it means freezing some budgets, is the only way manufacturers can manage materials resources. Even the usually least expensive and most readily available steels have been subject to cost and supply issues - steel of the kind used for brake pad backing plates for example.
"That has been a stable raw material in terms of price and availability for as long as we can remember, but even that is subject to daily price and availability fluctuations.
"The effects of 'Black Sailings' isn't only driving up freight costs, but driving down freight service availability and timings. Uncertainty is the enemy for any manufacturer, and that is another factor that has made us have to make courageous choices in terms of orders for materials from the Far East.
"Even now as I write, the cancellations of import services by sea and skyrocketing freight costs are requiring the use of additional resources in the management of purchase planning.
"We, indeed all manufacturers, need to ask the market to accept price increases on finished product as a consequence of all these factors, and those who are able to build inventory would be wise to do so. But they must make sure they are using great planning skills to ensure they can respond adequately and appropriately to all their customers.
"Newfren continues to look at 2021 with positivity - which is why our management has been prepared to bet, invest and use all their experience and the traditions that Newfren has built up in over seventy years in order to win. For the moment, the bets made in purchasing the raw materials are guaranteeing that our customers are facing very few delays in our response to their needs.
"But a lot also depends on the motorcycle and scooter markets continuing to grow. It is a bittersweet irony that our industry has seen demand sustain, and even increase at a time when so many businesses are challenged, and so many lives are disrupted. We must all continue to plan carefully and take nothing for granted."
