Lighting supplies businesses hitting a brick wall
Covid, Brexit and manual processes still impacting profitability in 2022
A new survey commissioned by OGL Group reveals that Covid, Brexit, the continued reliance on manual processes and supply chain issues are the greatest factors affecting profitability for lighting product businesses in 2022.
The research results focus on those companies that distribute commercial, industrial, amenity and exterior lighting products to providers and commercial businesses.
Lighting and cable systems remain the largest product sectors within the electrical wholesale market, accounting for around 46% of market value. The electrical wholesalers’ market contracted significantly in 2020 due to the impact of the Covid-19 pandemic. However, the market is expected to return to robust growth in 2022, as the economic situation improves and the lighting sector revives, with market value forecast to exceed pre-pandemic levels of £4.95 billion by 2025.
Both the Covid pandemic and Brexit have hit supply chains hard. Exacerbated by stock management pressures, firms are citing top technology priorities for the next 12 – 24 months as business performance reporting 47%, linking ERP with eCommerce 47%, delivery tracking 44% and managing inventory 44%.
The five main factors affecting lighting businesses’ profitability in 2022 were cited as the Covid 19 pandemic 50%, outdated technology 47%, manual processes 44%, employee cost 33% and Brexit 28%.
Digging deeper into coronavirus and its effects, respondents’ business priorities were to have flexible business software that can be easily adapted to new business models 97%, manage cashflow 94%, and upgraded IT systems enabling effective sales strategy and improved route to market 92%.
The pandemic has led to supply chain shortages and sees some lighting businesses stockpiling products and parts to ensure timely supply. Manual processes are still plaguing businesses leaving them behind the curve with regards to digital transformation; 99% of all respondents still use them, and 81% cited manual processes as slowing down their business efficiency.
Entering another potentially uncertain economic period with continuing supply-chain issues, the Ukraine-Russia war, cost of living and fuel price rises, lighting firm’s efforts to increase profitability are critical. Technology is at the heart of this. 92% of respondents agreed that technology is vital to the efficient running of business, an increase on 63% three years ago, while 92% agreed that automating business processes helps their companies stay competitive, up from 50% pre-pandemic.
Integrating to a single central ERP system appears to be beneficial. 53% listed the main reason to use a single system as removing duplication of work across different departments, followed by future-proofing business using the latest technologies 53%, 47% citing reduced administration time, and 47% stating improved efficiencies by improved accuracy of information.
Jason Huang, Assistant CEO from NVC Lighting Ltd and survey respondent, commented that the benefits of integrating disparate systems include 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.”
Single systems are beneficial for online stores, where stock checks and reporting ensure that customers have a good understanding of delivery timescales and product availability. Survey respondents confirmed that eCommerce has grown exponentially, with 83% of respondents stating 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.
Critically ERP systems are a key technology with 86% agreeing that ERP systems give greater visibility and control of stock. 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, warehouse management, CRM and more.
In a time when eCommerce has grown exponentially, integration with third-party software, especially eCommerce, online shopping channels, route planning and online payment methods is key, with 83% citing this as effective for managing their business operations.
The main barriers to deploying an integrated software solution were cost, with 50% citing it as a factor, down from 75% in 2019, followed by 47% with data security and 33% with business disruption. Cost is often associated with the misconception that ERP systems are only for larger businesses, and the lack of information about affordable subscription-based models.
Gary Reynolds – Operations Director across OGL Group, a technology provider with a strong client base in the lighting sector,
“Lighting companies need to streamline their businesses like never before to ensure that they efficiently and quickly meet demand and positively there is a greater degree of acceptance of cloud technology and understanding that ERP systems are not just for larger companies. Only through full visibility of all business processes, ideally via a single dashboard, will they fully understand their business, areas for improvement and a plan to meet the challenges that 2022 and beyond will bring.”
NB: survey conducted in March 2022 and any comparison is to the same questions in September 2019. Respondents were given a number of options for each question.