The End of Unto This Last
This is a copy of post by Olivier Geoffrey, founder of Unto This Last.
I worked there for a year starting in June 2006 and it was fundamentally transformative to my career and mindset.
09 Feb 2023: posted to untothislast.co.uk/pages/the-end-of-unto-this-last
Since the beginning of Putin's invasion of Ukraine we have been struggling to save Unto This Last, caught in the spiralling cost of our main raw material.
I would never have imagined such an ending when I started the company in February 2000.
By way of apology to our customers and partners, I want to provide some form of explanation. We are grateful for all the supportive messages received in these difficult times.
Our story in 2022
2021 was a bumper year for Unto This Last with record sales, up 40% on 2020. In June 2021, we opened a new workshop in South London, in an exceptional location in Herne Hill. We expanded into sofas and into metal products.
January
These positive developments did leave us a bit overstretched. Our order book now spanned over 6 weeks and a large VAT bill loomed. Nevertheless, we started 2022 with a reassuring bank balance to pay for it.
2022 was intended to be a year of consolidation. We focused in January on staff training, on reviewing and refreshing processes, and on cost accounting.
February
The invasion of Ukraine triggered a massive increase in the cost of our core raw material, birch plywood.
Suddenly, low margin products, paid upfront by customers, became cheaper to refund than to produce. Our main asset is turned into a massive liability almost overnight. This hit our cashflow severely.
We increased prices, which hit sales, compromising our cashflow further. It became clear in February that payment of the VAT bill would need to be deferred to avoid killing the business.
March
March brought yet worse news from our plywood suppliers who warned that sanctions against Russia risked cutting the supply of birch plywood off entirely. Our reading of the daily news from Ukraine took an existential turn.
For over twenty years, our birch plywood came from Latvia. This remained true last year. But with 75% of birch timber worldwide grown in Russia, prices exploded after the start of the war.
A sheet of birch plywood (240cm x 120cm), which we used to pay £25 and convert into a £250 product, now cost over £100.
April
We scrambled to identify alternative raw materials. We tested poplar from Spain, spruce from Finland, beech from Germany and Romania, pine from Brazil and eucalyptus from China.
We settled on using Finnish spruce plywood whilst planning to make certain products from German solid beech. By this point, we lacked the money to invest in new machinery that would have simplified our transition away from birch.
Our financial situation was degrading rapidly. We were not granted a credit line from new suppliers. We therefore had to buy beech in bulk and to pay for it in advance, which damaged our cash flow further.
May
We found in May that products designed for birch plywood don't "translate" well into spruce or solid beech. Birch plywood has exceptional strength and structural qualities. It machines extremely well and comes with a consistent thickness. It is the perfect material for digital micro-manufacturing.
We spent months, at great cost, redeveloping our product range to accommodate the problematic characteristics of both spruce and beech. This greatly slowed down production, increasing our client lead time, while hurting both quality and customer service. Sales were hit further.
Inevitably, this took a toll on the team. A first wave of resignations deprived us of key skills and experience, making our situation in production more complicated.
June
June was the time to assess the measures taken so far:
- The news from suppliers remained grim. We were told that birch plywood was likely to disappear entirely over the summer.
- The team was frustrated by the complexity of working with inferior raw materials. Developing in beech was slow.
- Certain clients, understandably, refused delivery of products in spruce, generating yet more refunds. Our financial situation became critical.
It was difficult to see a bright future with Spruce or Beech.
We had to close our new workshop in Herne Hill, in spite of the considerable investment we had made in developing the site and the great response from the local community.
We also had to put a halt to production of the sofa range (more refunds) and the metal products. We tried to refocus.
July
By July we are in crisis. We were out of cash and just about capable of making the payroll at the end of the month. Paying our VAT bill, now ballooned to a scary size, looked like a bad dream. In a last attempt to keep the business going we start discussing a possible takeover, without success.
We made contact with insolvency companies and got familiar with the interesting world of “phoenix companies” where convincing professionals entice you to fold down your existing company, go on holiday for two weeks, and come back to find a brand-new legal structure without debt, they would have arranged in the meantime…
Most of the team, legitimately worried, resigned. From 20 people on the payroll in January, only 2 would not hand in their resignation.
The only ray of hope in July was that our suppliers reported the birch plywood situation to be stabilising (though still at extremely high prices). It could be possible to have a continuous supply, at least over the summer.
August
August was crunch time. Going back to the known processes and quality of birch ply was tempting, but no amount of business modelling, with our current production methods, could accommodate such high material costs. It seemed pointless to consider any further investment. It was time to close Unto This Last.
But having your back on the wall does make you come up with useful ideas. We reminded ourselves of the training on lean manufacturing we had received, as part of our partnership with the Toyota plant in North Wales: “there is always a way to reduce waste.”
So, there was a possible new angle: instead of our old approach of “printing” one product per sheet of plywood, with inevitable waste on every sheet, we could design generic parts, exactly shaped to to use 100% of the sheet. This meant redesigning our entire product range around a limited set of standard parts, that could be used in a multiplicity of products with simple modifications.
Initial modelling showed that this could reduce plywood consumption by 50%, giving us fresh hope of a viable business model. However, it meant virtually restarting the company from scratch.
We called our rescue project “Precious Plywood”.
On this basis, I decided to put £100,000 of my personal savings into the project to save the company.
September
To make all standard parts compatible with each other, we restricted ourselves to a single finish: oak. We trained ourselves to paint and stain, so as to keep offering clients a good range of options. We abandoned our old assembly system, based on glued joints, and shifted to using internal metal bolts and threads. The first tests of the new system were encouraging. It seemed we would be able to manufacture products looking very similar to our popular old ones using the “precious plywood” assembly system, but at the price of a radical change in our production method. We had to invest in specialised machines for edge drilling and compound angle cutting, and develop a complex set of jigs.
We spent September reorganising production. This led to even longer lead times for clients. We were forced into yet more refunds. Meanwhile, a new team was recruited and we focused on training.
The initial fund injection started dwindling quickly.
October
We removed all the products from our website that could not be redeveloped in line with the new assembly system: all our shelves and storage products. We decided to refund them. We also adjusted prices again. Both these necessary decisions hit sales further. Cashflow suffered again.
Production started slowly, with a completely new system to invent on the fly, and a team still in training. The first results were encouraging. Waste was reduced massively. We looked on track to halve the consumption of plywood.
The cash flow situation remains dire, and I had to put more money in to be able to pay for each payroll.
November
In order to survive, we had defined a clear production volume target, which would put us just above break even, with a minimum of profit to start repaying our VAT debt, assuming we could reschedule it.
Our plan was to reach this production target in November. It did not happen.
Our production manager hurts his hand, and has to be put to administrative tasks for December, hitting production badly.
December
We launched a new range of modular products, using oak dowels. The modular structure enabled us to develop it very quickly. These were products with practically no waste, and efficient to manufacture. A good test of the new production logic. Sales were instantly encouraging, and we ended 2022 on a note of hope.
We also reached our waste reduction target in December. The cost of plywood was now sitting at a manageable 15% of overall costs.
The Christmas holidays were dedicated to a fresh financial assessment of the business and to modelling potential new developments.
January
Reality hits. In order to be able to negotiate a rescheduling of our VAT bill, which now looks like a huge mountain in the mist, we needed to reach our production targets pretty much immediately. We were progressing every day on our new assembly system but production figures were slow to pick up, with most of the team still going through basic training.
Our suppliers, justifiably worried about our financial situation, removed the last credit we could benefit from.
At this point, it became unreasonable to think that we would fulfil the orders we were taking. It is difficult to tell where the switching point between hope and realism lies.
The team was told there was just enough money in the bank to cover the last payroll, and we stopped taking orders.
Our final week was spent fulfilling as many orders as possible, working with the insolvency company, selling our machinery, sending back raw materials to suppliers to minimise unpaid debt, finding new tenants for our home in Brick Lane, and planning communication to our customers.
Friday 27th was the last day of Unto This Last, after 23 years in business.
Olivier Geoffroy – Founder.