UK: Braving the elements - companies whose sales depend on the weather. (2 of 3)

UK: Braving the elements - companies whose sales depend on the weather. (2 of 3) - The big names make decisions nine to 12 months ahead of time, so neither manufacturer nor purchaser has any knowledge of what the weather will be like in those crucial mon

Last Updated: 31 Aug 2010

The big names make decisions nine to 12 months ahead of time, so neither manufacturer nor purchaser has any knowledge of what the weather will be like in those crucial months of summer. "There's a fairly high risk element in it," admits Pifco's Webber.

Pifco designs, develops and tools its fans at its handsome redbrick Victorian works in Manchester, but subcontracts manufacture to Italian and Far Eastern producers because, says Webber, there simply has not been a sufficient basic market here. Nevertheless, the aim is to strike a sensible balance which is tenable whichever way the weather goes.

"We take a rather cautious, prudent stance," he says. "We're not in the business for a one-year quick hit. It's preferable to sell out than to be left with stock. If you over-extend yourself in a highly cyclical industry you can get caught."

The problem is that while cycles are obviously annual, no one year can be considered in isolation, because the level of stocks with the retailers and distributors at the end of the season will affect whether and how much they order from the manufacturer for the following year. The manufacturer may itself have leftover stocks and must bear the financing and warehousing costs on them until their ultimate sale.

For the same reason, just-in-time (JIT) is a vital management technique. "Everybody's into just-in-time," says Webber. "It's JIT in stocks, JIT in manufacturing, and ideally the distributors want delivery in early May, just prior to the summer, so that the cash tied up is held to a minimum." The window for sales to the consumer is May to July and there is little flexibility once the season starts because the standard lead time is 90 days. Explains Webber: "Even if we got the lead time down to 60 days, nobody wants delivery in August, because the summer is virtually over at this juncture. In autumn and winter there is little market for summer products."

To avoid having to shoulder the burden of leftover stocks at the end of the season, retailers would dearly like to persuade manufacturers to have a sale or return policy. Webber is against such a technique: "Some of our competitors do it because they want market share. But in my view it is bad business. Under a sale or return policy a sale is never a sale until the end of the season when you know what you get back."

At Boots, production of the suntan range Soltan is phased in three stages in an attempt to diminish the role of chance by allowing some reaction to the weather early in the season. Around 70% of sales are made between the beginning of May and the end of August. Main production runs from October to April, with the launch of the range in January. Even if it is a bad summer, Boots is committed to the first two phases and has to carry over any surplus.

The third phase, which may or may not be produced, involves ordering in stock and component cover to be held at the factory ready to be packaged if it is required; it can amount to as much as 25% of the first two phases and must be activated by the end of May to be practicable. Says group buyer Julia Halliwell: "Some companies do one phase of production only, but we think that's too risky. With the contingency plan we can react within two months. Without it, the quickest would be five or six months. Even so," she admits, "we're always wrong. There's always too much or too little."

At Kirklees, which manufactures components all year round, it looked at one point as if trouble was brewing last year. While the crucial May bank holiday weekends were hectic, "June was a complete washout", recounts Norbury. "The retailers held onto their stock. If the weather had stayed bad it would have been a disaster for us. We didn't sell a lot more but at least in 1991 we'll be selling to people who want stock."

Though the past two years have been good ones for Kirklees, the barbecue industry got a taste of how bad things could get in the mid-1980s when three poor years in succession caused many companies to fall by the wayside. "If the retailers haven't sold, they don't come back the next year - so one bad summer is two bad business years," explains Norbury. "You must be able to stand at least two bad summers."

While Kirklees has seen rapid expansion in the past two years (production doubled between 1987 and 1989), Norbury remembers less secure times. "There used to be a definite break between production and selling. We used to stop delivering at the end of July and then we were finished until we started to sell again in November. Five years ago we'd have been sat doing nothing at this time of year (early November)," she says, adding proudly, "but we're as busy now as we would be in the height of the season."

In the mid-1980s the company employed just 10 to 15 employees. Now that figure is up to 35 to 40, with an extra five or six temporary staff in the peak period to help with packing. Nevertheless, points out Norbury, employees know that the company may have to lay them off in a bad season. To spread the risk, Kirklees produces cooker parts for the American market and recently bought a fitness equipment manufacturer which sells by mail order.

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