Brexit: Keen carpet manufacturer leaves little to chance

Robbert Wapstra of Edel Carpets on the measures his company took to mitigate the implications of Brexit. “We’re not just standing idly by.”

How ready is the Dutch business community for Brexit? A pressing question that’s been hanging over the market for many months now. It’s generally thought that large numbers of entrepreneurs have been taking a ‘wait and see’ approach, and many of them still are. But not Robbert Wapstra, CEO of Edel Carpets: “We identified how Brexit might affect our organisation at an early stage and took action. You can’t influence everything, but some things are in your own hands.”

Genemuiden has been our country’s carpet capital for centuries. Almost three-quarters of the national floor covering and carpeting industry is located in this old town – designated by the province of Overijssel as a ‘Top Work Location’. A long-established but relatively small player in this specialist sector is Edel Carpets – with 50 employees and a turnover of around 25 million euros. The company has traditionally exported a great deal and has been operating in the English market for decades, where until recently it realised about 40% of its sales. It will therefore come as no surprise that CEO Robbert Wapstra is closely monitoring the Brexit developments. “We greatly depend on the United Kingdom, and that made itself felt immediately after the British referendum,” he says. “When the results came in the pound sterling immediately collapsed dramatically – and that trend continued. Of course, this had repercussions on our margins and profitability, as well as on the purchasing power of British consumers. That effect could be exacerbated in the near future by import duties on the British side. No one knows whether customs duties will actually be levied, but we’ve already included a disclaimer in our sales conditions stating that we may have to incorporate them in our prices. All in all, we realised that this combination of factors could cost us dearly in the long run. Something had to be done.”

Absorbing exchange rate fluctuations
Wapstra started by going to the bank to hedge his company against the pound continuing to go down in the longer term. “Fixing the exchange rate for a certain period makes you less vulnerable to currency fluctuations. Of course, it affects your profit margin if the price goes up again. But you rule out the risk of major losses for a while, and that weighed more heavily for us.”
To reduce its dependence on UK demand, Edel Carpets shifted its focus to alternative sales markets. “We took a close look at areas where we could still expect to see growth in market share. We’ve been investing more in that ever since. But that doesn’t change the fact that UK exports remain important for us, and for this entire industry. While in some countries carpet suffers from a somewhat old-fashioned image – in our opinion, wrongly – the product is as popular as ever across the Channel. The English just happen to be very carpet-minded.”

Extra braking distance
The fact that the UK may soon become a third country, which means that goods crossing the British-European border will be subject to customs formalities, is not a problem in itself for Edel Carpets. “90% of our total production goes abroad, including to countries outside the EU. So arranging customs matters is nothing new to us. We also have a forwarding agent who takes care of the declarations on our behalf; our company is too small to employ its own declarant. So that doesn’t cause us much extra work. We also have our regular carrier, which takes care of all the transport documents for us. All we have to do is deliver the bill of lading, the invoices and so on.”

What does worry Wapstra is that other market parties may not have their paperwork in order, which could cause logistic delays. “That’s another serious economic threat. Some doomsday scenarios foresee traffic jams of tens of kilometres around Rotterdam. We can’t have that. Our products cross the North Sea by truck and ferry, which means that our local competitors are always a step ahead of us in terms of delivery times. They promise ‘ordered today, delivered tomorrow’; we can’t match that. We simply cannot afford any delays if we’re to remain competitive. That’s why we’ve filled our storage space to the maximum on site – we’ve had an English sales office, with warehouse and coupage service, for some time now. And we ask our customers to buy more product in advance and keep it in stock. That’s how we create some extra braking distance, so to speak...”

Partial deliveries
Another bottleneck in this respect is partial deliveries. Wapstra: “Our transport company enters information about the cargo transported to the UK into Portbase’s Port Community System. This is a very handy system, because Customs can see what kind of goods go on board. If we send out a truckload of carpet there’s nothing to it: we can provide all the relevant information about such a shipment in good time. But what if we have to share the cargo space with other firms? Our carrier has many small customers, some of which operate in industries with very competitive time slots. They’re unlikely to have either the manpower or the time to submit the required data within the set time limit. And if they make errors, there’s a good chance that our product will be stopped at the border as well. Our logistics service provider is trying to resolve this issue, but it’s not that simple.”

Customers become importers
“What’s more: it’s not even enough if the Dutch business community has organised the paper flow on the export side properly,” maintains Wapstra. “The UK will also have to do its bit to make sure that commercial traffic is kept reasonably frictionless. There are however signs that the British authorities and the corporate world aren’t optimally prepared for what’s to come. As a carpet industry, we’re therefore working on a joint approach to better organise it on the import side. Each individual company is small, but together we’re big enough to be attractive to a local broker who can take care of our business there. Our trade association Modint has put us in contact with just such a local party.”

In the meantime, Edel Carpets has taken a notable initiative of its own. “We’ve sent a letter to our largest English customers – who have purchased products from our sales office so far – with the proposal that they become importers themselves. We’ve also provided an explanation of what they have to do: provide their EORI number and apply to UK Customs for Transitional Simplified Procedures – TSP. TSP makes it possible for companies to complete customs formalities over a longer period of time, so that not all the necessary import documents need to be completed at the moment that goods cross the border. Most of our customers understand the urgency and take up the gauntlet. If necessary, we can help those who’re less enthusiastic for any reason: in the worst case scenario, we’re willing to arrange everything for them.”

The wrong attitude
All in all, Wapstra’s company seems to be leaving little to chance. “I still hear directors around me saying: ‘Nobody knows exactly what’s going to happen, so we’ll have to wait and see.’ I think that’s the wrong attitude,” says the CEO. “The future is indeed uncertain, but that doesn’t stop us from anticipating some things. So it makes sense to at least make sure that your document flow is Brexit-proof. This will in any case reduce the risk of serious disruptions in your logistics process. And that’s even more important for producers of food or other perishable goods than for us as a carpet factory. I’d like to say to fellow entrepreneurs: what are you waiting for? In these uncertain times, you can at least exert some influence on what happens.”

There’s always a chance that things will fizzle out and that the UK will choose to remain a member of the European family after all. “That means that Edel Carpets will have spent a lot of time and money on all kinds of solutions for nothing,” says Wapstra. “But better that than standing idly by and watching our distribution process get disrupted and our sales continuing to decline.”

“Good information provided by the government”
According to Robbert Wapstra he has done everything possible to stay informed about the implications of Brexit for his business. He attended seminars and conferences on the theme given by VNO-NCW, his own umbrella organisation Modint and the NBCC (Netherlands British Chamber of Commerce). He also went to meetings organised by the municipality of Genemuiden and the province of Overijssel. “I attended some very useful presentations by specialists from Customs and other sectors. I feel that the government has really done its best to make the private sector aware of what is about to happen and to support the preparations for it. Take the online Brexit Impact Scan, for instance. Edel Carpets has benefited greatly from this, too.”

 

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