In a panel discussion at the LogiChem conference on 13 March 2023 in Rotterdam, with Robert Nessing, Global Head Supply Value Chain Fungicides, Crop Protection at BASF, Hanno Breummer, EVP, Head of Supply Chain & Logistics Europe, Middle East, Africa, Latin America at Covestro and Bjoern Neal Kirchner, Corporate VP Supply Chain at Henkel, the question was asked: What are the main disruptions that have impacted your supply chains? How are you mitigating risk? What is coming next?
For Bjoern Neal Kirchner from Henkel, the main challenges have been a lack of raw materials, inflation and the conflict in Ukraine. To mitigate this they have been bundling raw materials and building agility into the supply chain. On the demand side the forecast was hit, due to constrained supply. This cause and effect forced them to make proactive decisions. Looking ahead, they will face more geopolitics, but it’s all about setting up the correct processes and structures – it’s a marathon not a sprint. Bjorn wants to build an Amazon like experience – they need to stay on track and not get distracted, so that they can deal with whatever crisis comes. Lead time to customers is essential – it’s hurting the top line, as customer satisfaction and loyalty are so important. This was a given in the past, now it isn’t. It’s a new way of looking at SC and a prerequisite for success – they have to deliver to expectations. Henkel are focusing on ‘in the region for the region’, which makes the products more resilient, it’s part of the game. Lead times are improved if they stay local, but some raw materials have to come from China. Consumer change drives SC strategy change – again it’s the Amazon effect, it changed the paradigm, in terms of visibility needs, but there are demand changes too.
Hanno Breummer from Covestro stated that only 1% of their business is in Russia and Ukraine. The biggest impact for them has been energy prices. There were two major effects, rising prices shifted the confidence of customers, so customer demand plunged. Some chemical plants shut down – this led to shifts in network and flows, as mass volume products shifted between regions, such as polymers and hydrochloric acid that purify water. When the network shifts it causes lots of disruption, so energy prices and uncertainty had consequences. There was a driver shortage too, on top of energy crisis. The focus is now on resilience and supplying the customer on time, as well as sustainability. They have extended the network of distribution hubs, bringing products closer to customers with a more reliable delivery date. They have partnered with TailWind Shipping Lines, so that they have direct routes between China and central Europe and more reliable routing across oceans. They also have new electric river barges, which are larger than the diesel ones and they can go on Rhine even when water levels are low. Covestro have invested in the right planning software, which comes with a cost – but it is needed when there is more inventory. Cash management is very important, also the cost of non-delivery. If the second container doesn’t arrive for example, the whole production schedule is hit. They have just started integrated business planning, so putting everything together – digitalisation, visibility, systems, automation. They have invested in green energy, adding 10 windmills a day is the aim. But China is heavily investing in green energy – the green, carbon neutral products will prevail, independent of where they are produced. Europe is behind.
For Robert Nessing, BASF, the most important considerations now are availability of products, inventory management, cash management and product segmentation. Marketing, collaboration with other functions and postponement strategies are all essential too. They are now moving more than 10% of the product supply close to the sales window, so ‘treating it like ice cream’. Cost and cost cutting is topic number 1 in the short-term perspective. It is the biggest steep growth in planning he’s seen for 15 years, with elevated planning capabilities, all discussed through top management. The supply chain team works closely with marketing, on what is important to customers and how to serve them better. They need to fix the basics first. The number one priority is delivering products in full and on time.
Author: Julia Swales
Source: Foundation for Future Supply Chain