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The disruptions in the global supply chain require new ways of working

Covid-19 has affected the supply chain on a global scale. Living in a “just in time” world, a disruption like Covid-19, the traffic jam caused by the ship Ever Given in the Suez Canal and energy crises have created all kinds of difficulties for many companies’ supply chains. We met with Shaun Mahony, Anton Snöberg and Oskar Fransson to get an overview of the challenges we have met and discuss some solutions.

Anton and Oskar, you work at our head office in Kalmar with our global supply chain. What are your specific roles in the team?

Anton: My title is Global Supply Chain Manager – Supply Planning and I work with supply planning in relation to the coconut carbon factories, planning for their order books and making sure they have complementary product mixes, so we have good balance in the business.
Oskar: My business card says Global Supply Chain Manager – Procurement and I’m focusing on external sourcing.

Your department is based in Sweden, how does it work being in Sweden and having these roles?

Oskar: The big advantage is the time zone in that we have the US on one side and Asia on the other and we are in the middle. It’s positive to be based in Europe to manage this, because it involves a lot of coordination between salespeople, customers, factories, and external suppliers.

When Covid started, did people understand how much this would affect the supply chain? What do you remember from the early days?

Oskar: It started in China, and we have quite a large supplier base in China, so for me it was clear quite early on that this was going to cause major disruption. It was actually during the Chinese New Year (CNY) in February 2020 that this became more widespread and one of the first things that happened was that they extended the New Year holiday and many factories had to be closed for longer, including our factory in Tianjin (JAM) which was closed for a month. Normally it is only closed for a week at CNY, so other solutions had to be found.

The good thing was that not all regions in China were in lockdown at the same time, so you could buy from a region that was still open and find some creative solution to ship directly from there.

“Being transparent gives the correct information to people who need to make the decisions.”

Anton Snöberg, Global Supply Chain Manager Supply Planning.

Anton: It was a bit special because I went on paternity leave on 1 March 2020, so I was only going to be working 20%. Then March passed and things started happening in our factories, so from April I increased my working hours, and worked as much as I could, while taking care of my daughter at home. But she was a pretty calm baby, luckily.

The workload for the whole team increased and we, as the whole world was, were under a lot of pressure. Pretty quickly in April/May 2020, India and Sri Lanka went into lockdown. A lot of our output comes from there, so it had a huge impact on the whole order book.

Our team had to reprioritise in cooperation with the sales regions in three stages. In the first stage when lockdown occurred, in the second when it started to open up a bit and in the third stage, sometime in June, we were pretty much shipping as usual. But April and May 2020 were pretty tough months to make sure that, with the reduced capacity we had, we set the right priorities.

Fantastic efforts have been made to keep us going during the pandemic, for instance successful negotiations with the local authorities, but also a lot of hard work from the Jacobi people to keep the factories running. Would you agree we’ve done well given everything that has been going on?

Anton: Yes, I can really agree with that picture. Locally they have done a fantastic job, both with our employees and everything they have done to run the factories in Asia, and all the CSR work done in the communities we operate in is also something to highlight.

The cost increase in dollars for a standard container (40 feet).

Can you give us an overview of how our supply chain works?

Anton: We have factories in the Philippines, India, Sri Lanka and Vietnam, in all of which we buy charcoal that we activate. In addition to those countries, we also take charcoal from a major supplier in Indonesia and from there we ship it to the factory that needs it most. We can balance the deliveries because we are active in so many countries. This helps us keep one of our core values, security of supply, so we can constantly juggle and balance to keep the factories running.

After we have activated the charcoal in the factory, we screen for different sizes for different applications and can add value in the form of, for example, impregnation or acid wash, and then the product is shipped either directly to our customers or to consignment stock at the customers’ warehouses or to Jacobi warehouses. We basically ship all over the world and our sales organisations give us full global coverage.

Number of vessels waiting to be unloaded in September 2021. This illustrates the scale of container port congestion worldwide which continues to cause big delays in shipping, which have since worsened for some regions, especially to the USA west coast and Australia.

What does the situation look like right now?

Oskar: If we look at China, Covid still exists, so we see lockdowns in some regions sometimes as soon as new cases occur. Just in January this year we had a forced temporary shutdown at our factory in China. On top of that is the ongoing energy shortage in China. All commodity prices are currently rising due to energy shortages. Otherwise, as Anton says, the shipping situation is the biggest problem. Globally I don’t think there is a single company that is not affected by it, and that in turn also affects consumers, because of course prices will increase.

Anton: The greatest difficulty right now with the supply chain is what Covid has done to the logistics, because they are up and down right now, to say the least. We see container shortages and ship shortages, not enough staff in the ports, a huge shortage of truck drivers, ships skipping ports and prices that are absolutely crazy. In terms of production though, we have a fairly stable supply of raw materials and we have stocks of finished products.

What is the relationship with our customers like? how has the cooperation worked?

Anton: A great example is one of our customers who is a Fortune 500 Company where we ship to six different destinations. We have worked a lot within our supply chain, together with our customer, looking globally at optimising stock levels based on their demand forecasts. Together we decided where to ship material. It has helped us to keep them afloat in a good way. In our meetings with them, they say that we are one of their best suppliers in this area and that our well-organised approach has helped them to keep their production running.

Oskar: If you’re too lean, it automatically hits you pretty quickly when there’s a stoppage somewhere, and then it’s not as simple as just producing and putting it in stock somewhere. It’s about having the right things in stock, and that’s something we’ve worked a lot with during this pandemic, working with forecasting and having the right products in stock.

Due to the use of our products, Jacobi is an Essential Business. Has that helped us?

Anton: Absolutely, we have been able to refer to the importance of our products to certain customers and this has helped us in our relationships with local authorities. And we have also been

helped by some of our clients testifying that we are essential for them to make their products. Applications for drinking water and respirators to name just a few. I have seen examples of other suppliers who have had to shut down to a completely different extent because they did not have that status.

How does it work with price increases right now? It can’t be easy to introduce a price increase one month and then introduce another one a month later.

Oskar: Prices are rising faster than that now, especially for coal carbons from China; in fact, we get new prices every week because of the limited supply of raw material and skyrocketing commodity prices. If you look at the Global Coal Price Index, you will see that prices have been stable with normal increases for a 10 year period, but have now gone through the roof, especially in recent months.

How can this situation with unstable costs be handled?

Oskar: What’s important in a situation like this, whether it’s Covid or an energy crisis or something else that increases the costs, is to constantly communicate what’s going on, because you can’t influence all the changes. We can’t do anything about coal prices in China or shipping prices, they are out of our control. The only thing you can do is increase communication, so everyone knows the conditions and give the people who need to make the decisions the right information to make them.

What do you think the future holds for the supply chain? Is it possible to look a few years ahead?

Oskar: It’s hard to say, but it will be more important to have suppliers in more places and some partner closer in, say, Europe if manufacturing is otherwise in Asia. In all sectors, I think people are looking at how they could also meet needs closer to home.

Anton: For the production, we have looked in particular at the fact that key customers are not tied to just one factory, but that the product can be made in several different factories.

“Closer communication has helped us to be in a good position today.”

Oskar Fransson, Global Supply Chain Manager - Procurement.

To round things off, let’s look a little ahead. When will the world have its supply chain back to normal?

Oskar: It’s a very good question, one can only speculate, but in a webinar on this that we attended last week it was predicted that it could continue into 2023 before the balances are found for freight again. But that’s speculation, no one knows how long it will take.

Anton: Another thing I would like to say in conclusion is my belief that people at Jacobi have become closer during the pandemic. From production, through to us in supply chain, our salespeople and customer service, we have had even closer communication and worked together in a good way and that has really helped us to be in a good position today.

Oskar: I agree with that, even though everyone has communicated digitally in a way we never have before, sitting at home and working. But I think everyone is looking forward to meeting physically again, after all, many things are better in physical meetings.

Shaun Mahony, Executive Vice President Global Supply Chain  at Jacobi, has overall responsibility for creating a resilient supply chain. We wanted Shaun to give his view of the situation and how it might develop. 

Shaun, could you begin by telling us what you do at Jacobi?

My principal role is to supervise the operation of the global supply chain to make sure that we fulfil our Sustainability and Security of Supply mission in the best way we can, which is basically to safely manufacture and provide quality products, get them to where they’re supposed to be on time and satisfy our customers.

Inside the supply chain, there are many parts. Most of it involves careful planning to make sure that we produce only what we need to produce, that the product mix is optimised and that we find a way of getting it to its destination. Also, I get involved in an overview of inventory stock control, which our sales companies worldwide are keeping.

I’m located in the UK, as part of our Global Supply Chain team with Anton and Oskar leading their respective teams in Sweden. I am also responsible for the Global Shared Service team in Malaysia which has overall responsibility for ocean freight and procurement of product packaging materials.

Shaun Mahony, Executive Vice President Global Supply Chain.

Did you personally anticipate how Covid was going to affect your day-to-day work in your role?

I knew it would cause a lot of production difficulties and therefore we would need to do a lot more planning and continuous changing of plans which would greatly increase staff workloads, I could see all of that. But the bit I didn’t see was the extent to which ocean freight would go completely crazy; I mean, I thought it would present difficulties, but nothing like what has happened. Things just got worse through 2021 and there is still no improvement in sight.

Has it surprised you how our partnerships have held up throughout the issues?

No, it hasn’t surprised me, because I’ve always felt that we were very agile and able to move quickly to adapt to changing circumstances. Jacobi have a flat organisation, and we can change course quickly if we have to. Anders Skeini, our founder, developed that environment and it is in our DNA. So, as an organisation, I felt sure we would cope quite well with the problems.

So no, I did not expect any relationships to break down; in fact we used this as an opportunity to strengthen our relationships, which I think we have done. Most of our bigger customers have even increased their demand during this period and are closer to us.

Can you give us an example of how we changed our cooperation with our clients? 

Partly driven by this pandemic, we have expanded the use of a new workflow, as Anton refers to, which is based on a VMI process which a major customer requested us to run for them back in 2019. We are thereby more involved with the customer, talking directly to their procurement people, showing them a plan and openly explaining, for example: “We might have difficulties producing enough and with shipping it to you in time. So, what you must make sure is to inform us which areas are your most critical destinations which we should serve as priority.”

As part of that process, for one of our biggest global customers, I have directly spoken to some procurement people there three times a month for over a year now and have got to know them well; we have built a relationship where we trust each other to be transparent which works to both parties’ benefit.

Widening the scope of that process has been one of our improvements and that’s one of the things I get most involved in, trying to continuously improve how we work.

Jacobi Supply Chain Overview. Many different teams have to co-ordinate to realise the Jacobi supply chain process to our customers. Here is an overview of just some of those teams.

What do you think we have learned that will help us in the future when doing business or when certain circumstances arise?

I think it reinforced our need for risk assessments. Currently we can only make some of our top products in one factory, which hasn’t been an issue until it risked closure due to Covid. But we already had a programme to diversify the production so we could promise at least dual sourcing locations.

We have relied heavily on China for many years now and with their combination of freight and energy issues this is getting more difficult. Especially at the end of 2021 and into 2022 we are focusing on managing the situation in China. We can see what the risks to supply are in the event of a major global incident and obviously we hope that there aren’t any more in the immediate future. Either way, we plan accordingly.

This scenario reminds me of a masterclass by the English actor, Micheal Caine. He used the phrase “use the difficulty” meaning always look for a way to turn a problem situation to your advantage – that is what Jacobi has certainly achieved in dealing with the pandemic and as an organisation we should all be very proud of that achievement.

The demand for ocean transport is still greater than the capacity, which keeps costs very high, and the problems and associated high costs will last for a long time. We predict that it could continue well into 2023 before the balances are found for freight again. But we can already see that good things have come out of this pandemic situation. The relationships with our clients are now even stronger, and  it has led us to improve  how we work internally in many ways.

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