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.

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.

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.

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.