Disruption of supply due to Icelandic volcano ...

[A.S.]

Although under-reported here in the Far East, the volcanic ash problem is of unprecedented seriousness in Europe. As at this morning - three days into the travel ban - millions of travellers and kg of air cargo are 'in limbo'. The economic impact on European import/export business is enormous, just as the British economy is beginning to slowly recover from the global financial crisis of 2008/9. As the BBC report here the gravity of this situation will financially impact business large and small. Here is the position at Harbeth UK:

• We completed our financial year at 31 March and took a full inventory check. We then adjusted the MRP computer's inventory levels and are 100% correct on stock count and 99.7% on stock value. We know exactly what inventory we have on the shelf. We know exactly what we can build with that inventory and we know exactly when it will be exhausted.

• Our well-managed financial control position (I note British Airways unlike many has also been prudent) has allowed me to invest cash in a rising stock of paid-for parts inventory during the last two years to cover just such a disruption in supply. With such a long order book from customers we have no excuse for late delivery due to the non availability of piece parts - we must have adequate inventory stock to hand, and we do.

• We have all the parts we need in stock or arriving by sea for at least two months ahead assuming the usual level of rejects due to unacceptable quality etc.

• Production continues at normal speed and in fact, last week we recruited another production staff member who is already usefully improving productivity

• Most of our sales are supplied by air to our customers. Doubtless some will switch to sea shipment. This will lengthen your leadtime.

• We are warehousing at Harbeth the cartonised completed built speaker systems until customers call them off at their convenience as air or sea freight as the volcanic ash situation develops. We do not want your speakers to be crushed under a mountain of other cargo at the airport - better we sit on them under our control

• We are not at all concerned about the impact on our cash flow of being unable to collect payments and we do not need to and will not pressurise any customer to take delivery at this difficult time

• Assuming that end user demand remains buoyant, this volcanic ash problem and the disruption in supply is a temporary problem that a well-structured business like BA and on a micro-scale Harbeth can ride through from its reserves. Harbeth is wholly independent and financially structured for the long term, intending to be here to serve the next generation of consumers. This situation is just a minor irritation for us. You need not be concerned about your speakers when you see the unfolding grim economic impact of this volcanic eruption.

I apologise for our inability to maintain a continuous supply to your market but assure you that production is totally unaffected at Harbeth UK. Thanks for your continuing support. More pictures here.

Alan in Hong Kong

[Sebastien]

Yes, it means more patience for future owner. Then, it will be years of enjoyment!

Sebastien

[Sebastien]

I apologise for our inability to maintain a continuous supply to your market but assure you that production is totally unaffected at Harbeth UK...

Alan in Hong Kong

I read in the newspaper "Le Devoir" this morning that the majority of the europeans flight will get back to their regular basis on Thursday April 22nd. Do you expect an influence on Harbeth's speakers shipping?

Thank you,

Sebastien

[A.S.]

I do not expect any quick fix. First the backlog of stranded passengers must be cleared. I see from my airlines web site that there are about six days of stranded passengers but I've only been in Hong Kong delayed by 3-4 days. So I am not a priority and anyway, we must get the schoolchildren and students back first. My only wish is to be back by the General Election in the UK next week so that I can vote.

The ramifications of this ash problem will inevitably last for weeks and cargo is not a priority. As the dreadful 911 incident unraveled I said that the world had changed forever; and now the UK has a once-in-a-lifetime experience like this, I'm sure that our collective national psyche will have been influenced. This has touched everyone and many, many businesses.

The good news is that, as reported here, we have plenty of inventory - perhaps a little more than we should have by strict accounting rules - but that is my choice when interest rates are so low - and production one week into this situation has not been disrupted at all. In fact, the UK office tells me that the new staff member is being extremely productive and as the new boy has lifted the productivity of the entire team. But as for deliveries, every day we are pushed by customers for information on when their completed orders will be on their way. Unfortunately we just don't have that information from the carriers yet. Nor do we want to release goods too early as they may be crushed under more urgent, heavy goods. The key barometer of consumer confidence is distributer anxiety. I can report that not one distributor has cancelled, resheduled or reduced one single order; quite the opposite - all are pushing for delivery as soon as possible.

[A.S.]

From today's South China Morning Post (published in Hong Kong since 1903) I read that there is 5,150,000 kg of air cargo piled up here waiting to be exported. That's enough to fill fifty 747 freighters. That's just the export from Hong Kong - imagine what's piled up in airport cargo warehouses (including London) waiting to be exported here and elsewhere.

That fully justifies my comments as this ash situation unfolded that we should not release completed speakers too early to UK airports because there is a real danger that they will be crushed by the other cargo. Sorry for any inconvenience in getting your speakers to you.

Alan /Hong Kong

[Sebastien]

... I read that there is 5,150,000 kg of air cargo piled up here waiting to be exported. That's enough to fill fifty 747 freighters. That's just the export from Hong Kong - imagine what's piled up in airport cargo warehouses (including London) waiting to be exported here and elsewhere...

It can appear quite impressive but do we know usually how many 747 freighters leave Hong-Kong everyday?

If that volcano issue started about 10 days ago, we can assume that it represent five 747 a day? If so, 10 days at a regular rhythm will do the job.

Hope everything will be in order soon. At least, no human is in danger in that story.

Sebastien

[Sebastien]

Hi Alan,

One month later, it looks like all airports activities are back on track.

Do you have any news regarding the regulation of Harbeth's supply?

Thanks,

Sebastien

[A.S.]

...Do you have any news regarding the regulation of Harbeth's supply?Sebastien

Actually, production was completely unaffected because we have such good stocks of the materials and parts that we need to make your Harbeth - building up our inventory of piece parts was my policy decision implemented about two years ago.

Yes, now that flights have (I assume) returned to normal, so are shipment to our customers. It doesn't seem that the airlines are in any hurry to repatriate any British travellers stranded over here though. And as for Virgin Atlantic, I guess the most apt phrase is 'you get what you pay for' and not a drop more. You really see the actual strength and resources of an organisation at times when it is stressed. British Airways - 30% more expensive but probably worth every penny?

What has really amazed and surprised me is how wafer thin the Virgin operation seemingly is. It's a triumph of marketing over substance. Not one iota of effort was made to lay on staff to answer the phone at the Hong Kong customer service centre (judging by their total inability to answer the phone and disinclination to extend office hours) and no use has been made of the mobile phone sms contact number that I know for certain they have. As I think I mentioned before that, in my mind, thirty years of (somewhat sceptical) brand building by Virgin has now been exposed as little more solid than capped teeth and whiskers. The fact that Virgin, masters of communications and media management, didn't appreciate the importance of communicating with their customer - me - using inexpensive, fully automated sms massaging is frustrating.

[EricW]

.... The fact that Virgin, masters of communications and media management, didn't appreciate the importance of communicating with their customer - me - using inexpensive, fully automated sms massaging is frustrating.

Not only frustrating (and I'm sure it was!), but almost incomprehensibly stupid, don't you think? I mean, the amount of customer goodwill that could have been garnered, at essentially no cost, if only there had been a little creative thinking and initiative (and freedom to act).

It's a great example of why you want employees who care, who are committed to the well-being of an organization, and not just punching a clock (of course, that has to be what management actually wants, which isn't always the case).

Too much style over substance in this world. Just another reason we're all grateful for Harbeth, which is the opposite.

[A.S.]

Too much style over substance in this world. Just another reason we're all grateful for Harbeth, which is the opposite.

Thank you for the kind comments. Doing what we do is simple stuff with the added dimension that we are able to say what we think. That is surely the ultimate goal for every free-thinking person to aspire to: doubly so if it makes very good commercial sense.

News in from Harbeth UK today as our new Prime Minister is appointed with a massive task ahead of him. Harbeth Japan have, for the second time this month, dramatically increased their orders and thanks to an increase in production efficiency (with me away!) we've said 'yes we can supply'. That's the first time in a very long time that we have not turned away additional orders.

Alan /Hong Kong