Belchim Crop Protection began hearing rumblings about China’s crackdown on manufacturers violating environmental regulations and potential supply disruptions in late 2016. The company immediately began exploring options, which led to finding sourcing options outside China and the hiring of a supply chain manager.
“We started hearing the noise from China that the inspections are going to have an impact on supply,” says Tom Wood, General Manager for Belchim USA. “The decision was we needed to de-risk China for our supply. We started a dual sourcing project and looked at our Chinese suppliers to see if these were the people we wanted to stay with in the future or seek alternative production.”
Belchim moved its proprietary production to India to a company in which it owns a 20% stake. That company manufactures the active ingredients for several tier-one basic manufacturers, Wood says. The post-patent products are sourced from both Europe and India, with some of the formulation done in Europe. The plan is to have most of the company’s proprietary products sourced out of India with formulation moving to the U.S. to support U.S. business.
That will likely happen in the next three to five years, Wood says.
“The scale that we have now makes it OK to formulate in Europe and bring it to the U.S. It’s not so cost prohibitive,” he says. “Going forward we’re going to have to utilize the capacities in the U.S. to, one, shorten lead times and, two, address long-term cost efficiencies. So those are the types of things that we’ll be looking at over the next few years.
“India has highly technical, capable resources at good cost for us,” Wood says. “We focus directly on the ones that we have an equity interest in. Our experience with Indian companies is that they’re very efficient. We have not only the company that makes our AIs, but also one that supplies us as their exclusive distributor in the U.S.
“The supply chain is still long, but the interaction with them has been very good. We’re not averse to working with Indian companies for any reason. You find the right ones that fit your profile, and you go. We’ve had good success with that.”
Wood knows a little something about procurement. He began his career at Belchim in 2017 as Director of Supply Chain and Strategic Initiatives having come from FMC. He was named general manager in January. One of his key personnel actions as GM was to strengthen its supply chain expertise with the hiring of Jeff Carl.
“We hired a supply chain manager to drive efficiencies in our own supply chain in the U.S. as we go from a $4 million business to $6 or $7 million this year to probably $10 to $12 million next year, and then we launch several of our proprietary products. Then we accelerate exponentially. We needed to have someone who could manage the supply chain, which we didn’t have before.”
Carl won’t focus his attention solely on the U.S. He will work with Wood to continually evaluate the situation in China and other areas.
“We wanted to make sure we can effectively import products from India, from Europe, and if we ever do get to it, then China,” Wood says. “As long as you have a supplier who is reliable and has good manufacturing practices, even China is still a viable alternative. They’re still the manufacturers of the world.”
The changes Belchim is making have already helped the company avoid disruption.
One product called pyridate, primarily a corn herbicide used in Europe, includes intermediates that were being sourced from China. Those products can be manufactured using either a wet or a dry process. And, Wood says, the material can be hazardous, particularly when applying the wet process, which Belchim’s supplier was using. The Chinese were shutting down the companies using the wet material.
“At the same time that they were closing one plant, we were moving to another plant that had a dry process,” Wood says. “That’s where we dodged the bullet. That’s part of our dual sourcing strategy — having two suppliers of this intermediate for our product. We did it just in time. One was closing down as the other was ramping up.
“We had a strategy and tactics, and we followed them,” Wood continues. “And it paid off for us. Whether we were lucky or good I can’t say. I’d like to think that we were good.”
If Belchim didn’t have that second supplier available, it certainly would have hurt the company. “We probably would have shorted the market in 2017 with pyridate. That was the likely outcome,” Wood says. “The ones that would have been shorted were us. There always seems to be a competitor ready to fill the gap when you’re absent.”
Before Carl was hired, the company did have someone managing customer service and logistics, but Wood knew that wouldn’t be good enough moving forward. As Belchim grows its presence in the U.S., the new supply chain team needs to have more complex responsibilities.
“We’re still in building mode and growing,” Wood says. “We hired Jeff to bring some of the experiences that he has in purchasing and forecasting and process improvement, and to add little bit more professionalism to our own supply chain and to implement new systems.
“We took what could be viewed as ad hoc and put a professional person in there who knows how to manage larger supply chains,” Wood says. “We’ll see a good result because of that. The first thing we’ll see is inventory control — managing the comings and goings to make sure we have enough in stock and, of course, not so much of the others. In the past we’ve been haunted by bulk purchasing. Those would be the first targets that we’ll get to.”
Target No. 1, Wood says, is reducing working capital by $5 million on the average for the year. That will come from improving inventory and back office efficiencies — “connecting to our financials, managing the forecasting process so we get it right the first time or at least better than we do today,” Wood says. “All the basic blocking and tackling we’re going to hit first.”
These changes should generate some nearly instant results, Wood says.
“Our suppliers will feel this is a more coordinated approach. Even the basic things — ordering, forecasting, communication — our suppliers will feel a better capability from us immediately,” he says. “Going forward, as we bring more formulation into the U.S., they’ll see our lead times will be much shorter than what they might be today, not that we don’t have quick response now. They’ll see things move more efficiently from our supply chain into their supply chain. Those are the things that, one, our customers will like and, two, will help us control our costs even from a warehousing standpoint.”
There has already been some positive comments from companies.
“We’re getting feedback from some of our suppliers, even on the basic stuff,” Wood says. “And as we grow, we will have to add more capability — maybe separate sourcing from customer support — but for now, Jeff is our guy.”