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Navigating Global Disruptions and Mitigating Risk for the Foam and Adhesive Supply Chains
On Tuesday, 17 May, experts across the foam and adhesives supply chains discussed the latest swathe of supply chain disruptions. War in Ukraine has led to the destabilisation of Europe’s supply chains as many free trade routes have now been closed, in addition, sanctions have been placed on oil and gas imports from Russia. This is not to mention the continued effects of COVID-19 and China’s zero-tolerance policy, which has led to further delays in European imports.
The webinar began with a presentation from Vaiva Seckute, Principal European Economist at S&P Global Market Intelligence. Vaiva provided a macro-economic overview of the current strain on global supply chains.
“In the middle of 2021, we have seen that supplier’s delivery time has increased to record highs. At the same time, the backlogs of work increased to historically high levels. Since then, we have seen some deceleration in those metrics, although we continue to face very high input prices.”
Vaiva’s insights were an excellent reference point for the foam and adhesives supply chains as they revealed how supply disruptions were impacting not only their industry but all sectors. Using Purchasing Manager Index (PMI) as a key indicator, she could track last year's events. It was clear that transportation of goods remained the most pressing challenge for businesses of all types. Simon van Dingstee, Global Supply Chain Director for IGM Resins, provided some perspective from a raw material supplier. For Simon, “Understanding the challenges [of supply chain operations] is a day to day activity. The workload is high for us, so we check in with the team daily.” Here, Simon is alluding to how the landscape is constantly shifting, and so to stay on top of the situation, constant vigilance and communication are imperative.
While the landscape is ever moving, Simon was adamant that “Our biggest risk is transport as it is changing continually, and we are seeing shifting bottlenecks. For instance, the current port lockdowns in China are having a major impact.” With imports and (more importantly for the European audience) exports grinding almost to a halt due to China’s latest COVID-19 countermeasures, the international transportation of raw materials has become a daily battle. Lead times have continued to grow, and transportation costs do not appear to be going down.
Nanneke van de Mosselaar, Trading and Procurement Director at Federal Eco Foam BV, strongly agreed with Simon’s assertion regarding transport costs, “We don’t have a lack of materials, but transports are giving us headaches.” Nanneke provides the perspective of a foam recycler, meaning that in addition to relying on raw, virgin materials (such as those provided by Simon’s organisation), her company also collects end-of-life materials for processing. Both are proving to be a challenge. The most formidable impact of the current disruptions is transport cost. Nanneke explained: “Due to the high trade costs, it makes our products more expensive, not the products themselves but the price of transporting them to and from our customers and suppliers.”
When asked about solutions to the current situation, all experts agreed that collaboration would be the way forward. The relationships between businesses needed to be maintained; as Nanneke stated: “We need each other. I’m hoping we will all be learning this from one another. We all have the same goal.” While short-term deals with other companies may be a short-term solution, Nanneke pointed out that reputation is the key to trust and once out the other side of these challenges, those relationships would need to be maintained if business operations were to resume properly. Simon agreed and added the importance of looking to simplify supply chains wherever possible. “We are trying to simplify our supply chain. To reduce complexity and build long-term relationships with our suppliers to make sure we understand what’s happening at their sites.” Vaiva was quick to add that security would be a much bigger consideration for companies moving forward; “Lots of companies were not expecting what happened in Russia as many invested a great deal but are now leaving with huge losses. After we get a breather, the supply chains are going to change, it might get a bit more expensive, but security will be important as well.” Working to ensure better security and price balance would be of the utmost concern.
The events of COVID-19 and the war in Ukraine have proven to be taxing on global supply chains. The cost of transportation has continued to remain high, and further challenges continue to arise. The experts explained that to navigate a course through the current situation it is imperative to focus on building and maintaining relationships with the supply chain. Once damaged, these can be hard to repair. Simplification of existing supply chains wherever possible could help mitigate risk in the future, and if nearshoring is possible, it could save future headaches. Finally, security should be further integrated into disaster plans. Events between Russia and Ukraine have shown how important this investment could be.
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