By now, everyone has heard of a virus called COVID-19 or coronavirus. This tiny living thing (although the line between lifeless and living can sometimes be blurred when it comes to viruses) has stopped the world’s second largest economy – China. Analysts predict that the impact of the coronavirus on the global economy will be significantly greater than that of the Sars virus in 2003. At that time, China accounted for 4.2% of global economy, today this number stands at 16.7%.
And there is nothing to suggest that the story will end there.
In the northern parts of neighbouring Italy, life has practically stopped. Schools have been closed, there is no more pasta to be found on the shelves, restaurants are deserted. They even cancelled some football games and football is the most important thing in Italy.
The economic damage in 2020 is estimated at up to € 27 billion.
What does this mean for global trade in wood and wood products?
For starters – the traditional Milan fair has been cancelled and so far postponed into June. It may not seem like much, but this delay alone is causing great economic damage. Products will not find their customers, deals will not be concluded, people will not meet. I am also staying home, of course.
I am an optimist, as always, but we still need to remain realistic and think about the next challenges that await us if the spread of the coronavirus stays out of hand.
- DEGLOBALIZATION
Countries are already closing their borders, travelling is limited, and global tourism has virtually stalled. The International Air Transport Association (IATA) warns that the annual loss of airlines due to the coronavirus could exceed € 22 billion.
Trading in wood and wood products has become a global business in recent decades. Logs, semi-finished products and furniture are transported from one end of the world to the other, and these connections may break due to transportation problems in the coming months.
On the purchasing side, it is certainly beneficial to have a slightly larger stock of materials and semi-finished products, so that, due to the currently hampered supply, there will be no need to reduce production or even close production facilities. The same is true for stores with semi-finished wood products and furniture. It would be wise to find replacement local suppliers for the products we need. In situations like this, we often discover that we have excellent suppliers nearby and do not need to import products from neighboring countries or even from the other end of the world.
- HONEST RELATIONSHIP WITH BUSINESS PARTNERS
An open and honest attitude towards business partners is the basis for successful long-term cooperation. There is nothing worse than informing your partner that they will not receive the ordered products the day before the promised shipment.
Everyone already found himself in a situation where they could not deliver the products on time. Had they informed their partner in a fair and timely manner, a solution of some kind was always available.
A few years back, I had to inform my Norwegian partner myself that our production had stalled due to a broken electric power line and that the shipping of massive panels would be delayed by more than a week. For him, this was a big problem as it meant he will not be able to finish several projects on time. To resolve the problem, I helped him procure the plates from one of the local dealers who had similar products in stock. This way, I managed to keep a customer who was grateful to me for being honest and helpful, while at the same time, I also made new business connections with the local dealer.
Openness and honesty always pay off.
- ONLINE BUSINESS
Some branches of the industry are already running a highly developed online business, while a major part of the wood industry remains rather inactive online. Perhaps now is the time for companies to tackle this challenge. If travelling is restricted, people will stay at home more and online shopping will increase. And if you are not online, then you do not exist.
The excuse that some products cannot be sold online is just that – an excuse that loses all merit as soon as someone succeeds.
There is a company that sells boards online by photographing each board individually and posting the pictures on its website. The buyer can then browse between the photos, selects the board that he likes and buys it. A visit and physical examination of the boards is no longer required.
- BUSINESS OPTIMIZATION
The best time to optimize your business is when economic growth is positive. In times like that of course, most people are mainly concerned with sales and the potential growth of their company.
However, this may be the right moment to stop and think about the situation in the company. An entire decade of economic growth has certainly left room for optimization, especially if we have not devoted too much attention to it as we were too busy with sales.
Consideration should be given to what costs can be reduced and what business or production processes can be improved to maximize savings.
The easiest way to save money in the short term is by cutting salaries. However, do you want to have dissatisfied people in your company in these challenging times? I myself explore all the other solutions first, and I only lower my employees’ salaries after I have lowered mine.
Of course, we should not be too pessimistic. One of my larger German customers told me: “If people don’t travel, they will invest more in their homes. And this is where we should be looking for our opportunity.”
Who knows, maybe he’s right?