First Covid, then Brexit and now war: have electrical and lighting supplies businesses hit a brick wall?News
Posted by: electime 14th December 2022
Profit levels threatened by high-level economic and social change including disrupted supply chains and an overreliance on manual processes.
Charlie Grant, Head of Operations, OGL Software
Covid and Brexit, the continued reliance on manual processes and supply chain issues are all affecting profitability and are a major cause for concern for businesses in the electrical and lighting sector in 2023. Now with the recession – predicted to last two years – high interest rates and inflation are further compounding a gloomy outlook for the industry.
Respondents to a recent survey commissioned by OGL Software revealed that the Covid pandemic caused an industry-wide shift to ecommerce, and together with Brexit, massively impacted supply chains. These firms have revealed their top technology priorities over the next 1-2 years as business performance reporting (47 per cent), linking ERP to ecommerce (47 per cent) and delivery tracking and management of inventory – both 33 per cent. ERP refers to a suite of integrated software that businesses use to manage day-to-day business activities, such as sales order management, stock control, finance, CRM and more.
Covid 19 was confirmed to be the main obstacle to profitability, with outdated, inefficient technology, manual processes, employee costs and Brexit cited as the other reasons. Respondents also cited major factors hitting profitability as “access to talent, variable costs, warehouse space and war” as well as “stock value and liquidity.”
Business priorities have shifted as a result of the Covid 19 pandemic. The main priorities are to have core business software that can be easily adapted to new business models (97 per cent), manage cashflow (94 per cent), and upgrade IT systems enabling effective sales strategies.
The pandemic has caused supply chain disruptions, leading to some electrical and lighting companies stockpiling products and parts to guarantee supply.
According to one survey respondent: “ensuring that there is excellent visibility and accuracy, especially in terms of inputting and monitoring orders” was a key factor to profitability. He continued, “armed with up-to-date information, the purchasing team can drive down costs when buying.”
Another added: “The main issue is using tools to maximise gross profit and ensuring that all staff are fully productive as the biggest cost is the wages bill, so being overstaffed is bad for profit. Inefficiency in the daily process and mistakes can also have an effect but are secondary”.
Technology is a keystone to recovering profits. 92 per cent of those surveyed agreed that technology is an essential component to their business running efficiently, a 62 per cent rise from three years ago, while 92 per cent confirmed that the automation of business processes helps their companies stay competitive, a 50 per cent rise from before the pandemic.
Companies are still lagging behind when it comes to digital transformation – with manual processes a major hindrance. 62 per cent of businesses referred to them as an issue that could lead to the potential loss of revenue, preventing them from accurately forecasting performance and sales.
A key finding of the research was the broad spectrum of software deployed by businesses and the siloed nature of those systems that don’t always “talk to each other” to provide a full overview of operations.
Electrical and lighting companies use a variety of software systems to function in fact, 95 per cent of those surveyed use one or more software systems to run their business, from inventory/stock control to accounting software and CRM (customer relationship management).
81 per cent of respondents from the electrical and lighting sectors saw benefits from consolidating disparate systems. Referring to the main reason for using a single system, 53 per cent cited the elimination of duplicated work across different parts of the business, 53 per cent saw the future proofing of business using latest technologies, 47 per cent stated a reduction in admin time, and 47% confirmed increased efficiencies from the improved accuracy of information.
Centralised systems are advantageous for ecommerce stores, where stock checking and reporting give customers a transparency of delivery timescales and product availability. Those surveyed confirmed that ecommerce has grown exponentially; 89 per cent stated the importance of being able to sell products online easily. In addition, 83 per cent of respondents agreed that using an ecommerce platform was an effective tool for managing business operations. This comes as little surprise as businesses shifted online en masse to ensure continued supply.
Anderson Electrical’s Director stated that his firm replaced an outdated legacy system with an integrated ERP system, to efficiently manage stock and sales. The overhaul has given Anderson Electrical a real-time overview of its stock levels, incoming shipments and outgoing orders and the integration with the trade counter has also enabled the company to provide its customers with up-to-date pricing information and generate orders straight away, thus increasing transparency and efficiency.
“We are no longer running out of stock like we used to because we can create workspaces to give us complete visibility. We’re also buying and selling at the right price because the system tells us. Profit4 provides us with powerful information, all in one place. It connects all areas of our business to make it more fool proof and gives us the confidence that nothing will be missed because there’s less human involvement.”
With the accelerated adoption of post-covid, digital transformation, cloud computing is still a catalyst for change with 81 per cent of those surveyed stating that hosting applications and data in the cloud has improved efficiencies and productivity (or would improve them if they migrated applications to cloud).
Concerns about security persist, despite the benefits of cloud – from 55 per cent in 2019 to 61 per cent in 2022. This growth is in line with the migration of core applications and data to the cloud, and businesses still not realising that many cloud-based solutions, such as ERP, provide superior cloud security features, meaning that customer data remains secure.
When analysing technologies that compile an ERP solution, inventory/stock control (89 per cent) and accounting (83 per cent) were seen as the most effective for the management of business processes. In a time when ecommerce has grown rapidly, consolidating third-party software, especially ecommerce, online shopping channels, route planning and online payment methods is crucial, with 83 per cent citing this as an advantage of using one centralised ERP system.
NVC Lighting Ltd is a business that has already profited from automating processes by integrating disparate systems. Jason Huang, Assistant CEO, clarified how automation facilitated the ability to “track the whole processing of all kinds of orders, including sales, purchase and works orders. Additionally, all reports of operations can be exported quickly and accurately.”
Cost is still one of the main barriers to installing an integrated software solution, with 50 per cent confirming it to be a factor, down from 75 per cent in 2019. Other barriers cited include data security (47 per cent) and business disruption (33 per cent). Some businesses still associate cost with the misconception that ERP systems are only for larger businesses, and a lack of information about affordable subscription-based models.
Positively though, many businesses now accept cloud technology and understand that ERP systems are not just for bigger firms. Digital transformation has no doubt saved many businesses who have embraced online commerce, but manual processes remain a hindrance as are disparate software systems, both of which lead to inefficiencies.
Since Covid and Brexit, businesses have barely had the chance to get back on their feet. This, coupled with the gloomy economic forecast ahead means that companies would do well to streamline all aspects of their business processes to recoup profits.
The 81 per cent of respondents stating that hosting applications and data in the cloud has improved efficiencies and productivity is positive. It signifies that electrical and lighting businesses are now moving towards the concept of a central, unified view of a business, especially its inventory levels, and integrated technologies like ERP will engender better profitability, increased productivity and accurate data for planning purposes.
At OGL Software, we last conducted the same survey in 2019. Since then, many have transformed their businesses at a rapid speed. There is still some way to go, however. Only through a complete overview of all business processes, ideally via a central dashboard, will they have a full understanding of their business, spot areas for improvement and a plan to meet the challenges that the coming years will bring. Electrical and lighting companies need to mobilise to streamline their businesses to ensure that they efficiently and quickly meet demand.
Access to the full report is here: https://www.ogl.co.uk/profitability-in-uk-wholesale-businesses
OGL Software’s top 5 tips for a successful ERP implementation for electrical and lighting businesses
- Analyse business processes.
- Review and clean customer, supplier and product data – to ensure that only necessary data is migrated to avoid further complication and data errors.
- Select an ERP platform based on your future business strategy and goals – select a software solution that will grow with your business, thereby supporting your needs in the future.
- Implement training – identify super users for each department so they can help to train staff moving forward and take ownership of business processes for their department.
- Choose the right partner – invest in a software provider that can help you to achieve maximum potential from your investment and support you.