Insight

In 2017 Fabory has grown significantly in volume and revenue across all the countries in Europe where we have operations. The solid growth started in 2016 and has been accelerating ever since. 

This growth is driven by our continued focus on building ‘share of wallet’ and winning new business, supported by an encouraging economic growth. The accelerated growth caused some challenges in our supply chain in the first half of 2017, which we solved by extending our warehouse space by another 10,000m2, which also facilitates the further growth we foresee for 2018. 

The world of our customers continues to change as a result of the megatrends around digitisation, data and demographic changes. We see continued, increased demand from customers for data, and for electronic solutions to support effortless digital ordering and invoicing. This impacts the way in which we support our customers and drives the investments we’re making in our digital platforms while reducing the number of physical shops. 

More customers are also looking for supply chain solutions such as kitting, and other value adding services like extensive technical support. On the product side we are experiencing more and more the benefits of combining our fastener procurement strength with our parent – W.W. Grainger Inc. This is generating a lot of additional volume to expand our sourcing in Asia, increasing our relevance to suppliers, and enabling us to offer the full range of imperial sizes to our customers. 

The economic growth also has a downside. Talented people are becoming increasingly scarce, most notably in parts of the business that require people with digital and data skills. We’re very fortunate to have such a wide geographic footprint, which gives us access to talent in all of these countries. Nevertheless, we expect ongoing challenges in acquiring and retaining team members with these scarce skills, since all companies seem to be going after the same group of people. This war on talent will also have an impact on wages and salaries. We expect those to increase at a higher rate compared to recent years. These costs need to be reflected somehow in our pricing and therefore we expect the existing upward pressure on selling prices to continue. 

Selling prices are influenced by cost levels as well as by the prices of raw material. Fast changes in the sourcing environment are making it more complex to predict future price development and also the availability of fasteners in the market in the near future.

Although strong economic growth leads to price fluctuations, due to changes in raw material prices, from a sourcing perspective we see three significant additional drivers that will challenge and influence the fastener market. 

Firstly, more and more indirect influences are starting to play an important role in sourcing. Take China, the world’s largest steel producer. China has been working to tackle overcapacity, which has translated into higher steel prices in the market. The country is also working to reduce its air pollution levels. The ‘Air Pollution Prevention and Control Action Plan’ is threatening to shut down many smaller steel mills and plating companies, which will inevitably lead to availability issues.

The second influence is politically motivated. The trending desire to protect domestic markets from low import prices and to avoid long-time claims from the US and the EU causes uncertain future price developments and availability of products.

The third major challenge we see facing the fastener market will be the increasing amount of new regulations influencing fastener businesses. REACH, RoHS, Conflict Minerals, the Construction Product Regulation and many other regulations are changing the product demand and having an impact on stock management and the amount of paperwork needed.

We believe that these influences and challenges will have their effect throughout 2018 but also beyond.