FM industry must prioritize on efficiencies to fight inflationary pressures to guard its margins
July 8, 2021

Only HR related costs are still under control, and even that not for too long

Inflationary costs are starting to weigh down FM businesses in the UAE. Some of these cost gains relate to imported cost escalations.

With concerns of inflation on the rise, it is time for the FM (facilities management) industry to guard against all the cost pressures that come with it.

To understand the inflation effect in FM, one needs to have an insight on key cost components. Manpower remains the single most significant cost component, and the primary indicator to sense any inflation warning. The people related cost forms more than 60 per cent of the total cost.

In the current scenario, this cost remains relatively stable, barring housekeeping staff costs. This has risen due to the flights ban and related visa issues. However, the main cost overruns are due to the rise in the costs of consumables, spare parts and logistics, which are showing price volatility.

Some respite on HR costs
In normal course, manpower costs play with inflation dynamics in facilities management – but it is manageable in the current context. The job market is still subdued, and resources are by and large available.

We witnessed a considerable upsurge in housekeeping consumables cost in the past year as additional demand created a supply issue. This was further aggravated due to stockpiling by traders in pursuit of opportunistic interests. The rise in demand for soft services and disinfection, more so due to pandemic-related preventative services, was another factor that increased pressure on supply chain to meet new demands.

Across the board rise
The same is the case for most consumables and materials in civil, plumbing and even landscaping. This is indeed due to supply chain issues between production backlog and shipping challenges.

Commodity prices globally have shot up, which is leaving factories with order pile-ups, and most of the shipping routes are clogged. These trends have a role to play in the inflationary trends. This is indeed posing a challenge.

Squeeze by suppliers
We have seen an almost 25-30 per cent increase in various supplier quotations, including services. This is, in fact, a double-whammy for the FM industry as it is already struggling with a squeeze on margins by clients.

The FM industry needs to realign its priorities and concentrate on supply chain costs. Not only productivity efficiencies, but cost and source of materials needs transformative ideas and strategies. With likely gross margin pressures on the horizon, the FM industry needs to find ways to mitigate costs, whereby technology and supply chain shall be key drivers to keep inflation’s impact at bay.

Source: Gulf News

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