Integrated Supply Chains Utilizing Well-Founded Processes Win
21 June 2022 If there is a path to successful sourcing in today’s global market, it’s likely Stephen Pearce knows the way. In continuing our con-versations with crop protection experts, we talked to Pearce to provide best practices for navigating disruptions.
As part of our Industry Insights series, you can find dialogues with other experts like CS Liew, Managing Director of Singapore-based Pacific Agriscience, talking about M&A. In April, we sat down with Melinda McCann, Transformation Leader for ADAMA Agricultural Solutions, who offered insights about the Russian-Ukraine war’s impact on the global agrichemical industry.
AgriBusiness Global DIRECT also wants to hear your perspectives through comments on our LinkedIn group page, where every Monday a new question is posted to promote community problem solving and idea sharing. Join our online community as we continue this discussion started with Pearce.
MEET YOUR EXPERT
Stephen Pearce is recognized across multiple industries as an expert practitioner in strategic sourcing, global direct and in-direct procurement, business development, M&A integration, and alliance development. Currently, he is the co-owner of Chemovateq Swiss AG, which owns Bancella Limited, a company dedicated to delivering crop solutions to growers and food companies across Africa and one of the founders of AWP Associates Limited which specializes in business transformation and supply chain. Pearce also serves as an AgriBusiness Global advisory board member. You can meet him in person at the AgriBusiness Global LATAM Conference and Summit on 2-3 August 2022 in Panama City, Panama, where he’ll be presenting on biologicals.
We asked him for insights into best sourcing practices during the continued challenges facing the crop protection industry. He also shares his perspective about sourcing in Africa in the Industry Insights video.
ABG: HOW DO YOU DEAL WITH THE DISRUPTIONS IN THE SUPPLY CHAIN?
Getting the right products, in the right place, at the right time remains challenging. We have numerous challenges and periodic issues that have been highly disruptive in supply chains over the past four years. The latest one being the Shanghai lockdown and associated issues at the port, which have increased lead times. Limited goods are being moved into Shanghai due to the unwillingness of trucking companies to deliver because of the current quarantine regulations. Other port options are available, but an additional challenge is finding specialist warehousing for cargos with a dangerous goods classification. Not all ag chemicals have a dangerous goods classification (such as glyphosate), but those that do have it, in the case of Shanghai, can be stored and cleared via the warehouses in Puxi.
Staying ahead of the game is the only way to give yourself a fighting chance of securing material. Make sure that your sales and operations planning caters for lengthy and often uncertain lead times. Getting product in country is taking longer, and supply chains, in terms of time, remain problematic. Make sure that you have all the right S&OP (Sales and Operations Planning) tools and processes in place to make sure that you’re on the right side of your buying decision. When converting your demand plan into your supply plan make sure you build in extra time, and when you convert your supply plan into your purchase plans, build in plenty of forward cover. Those who are geographically de-risked have benefited during this period.
HOW DO YOU THINK THE SHORTAGE OF POTASH WILL IMPACT THE INDUSTRY?
With the shortage of potash, there will, inevitably, be a supply demand pull at a field level that will trickle through the value chain. The largest producers of potash are Russia, Belarus, and Canada.
Potash is crucial to plant health and plays a critical role in the efficiency of nitrogen utilization in the plant. The limited supply of pot-ash is going to be a big challenge to food supply.
Try to get as much information and talk to the right people to help you see around these corners and collectively work together so we can do a better job in protecting the world’s food supply.
HOW DO YOU THINK THE WORLD FOOD CRISIS WILL AFFECT CROP PROTECTION?
In terms of general supply and demand, some of the gaps in respect to crop shortages that are expected may influence the pricing of certain chemistries. Equally, commodities will be short, the price of crops are going to be higher, at the same time growers will want to maximize yields and thus may have room for more discretionary spending for products that improve efficiency and enhance yield.
You know, there are some things we’ve learned in previous years about the importance of an agile supply chain. Even those who have it struggle. Those who do not have agility have been in complete turmoil, and its cost them dearly. I think the companies who have a more integrated supply chain process will also stand to be more successful and address the serious disruptions that we have been experiencing. These disruptions will continue in the next 12 to 18 months and course corrections to ensure adequate supply take time to execute effectively.
As a result of COVID-19, we had circa 133 million people with potential food security issues. With the recent developments in Ukraine and Russia and the associated food shortages, we now have nearer 380 million people in the world with potential food security issues. There will be critical shifts in where things are grown — for example once there is enough seed, more sunflower could be grown in Argentina. This, too, will affect where products will be purchased and needed.
With food inflation and the risk to food security for so many, as an industry, it is important that we deliver the materials needed to protect the world’s food supply.
WHAT ARE COMMON MISTAKES COMPANIES ARE MAKING IN SOURCING RIGHT NOW? AND HOW DO THEY FIX THEM?
Not trying to understand or abandoning the process of understanding what their full entitlement is and constructively deconstructing what they are buying to understand what the key drivers of costs are. Even though it might be a sellers-market, knowing what the baseline is remains important.
Right now, for example, we know inflation has run at 60% plus up to the early part of this year, but that deflation looks to be running at around 15% on average as ballpark landing figure. Obviously, this varies enormously between chemistries and categories, but if you don’t know what your “should cost” models tell you, you are flying partly blind. The challenge right now though, for many, is bandwidth. People who are on their backfoot are so busy putting out fires, it’s hard to do anything else. Once you are behind the curve, those who are stuck in a spot-purchasing cycle, simply move from one fire to the next.
Make sure that you have a good relationships and processes in place with your sales teams, so that your demand forecast gets turned into supply plans in a timely fashion. Those supply plans need to be robust and get turned into purchase plans that you know can deliver on the customer’s expectation. Equally your relationship with your supplier is important to make sure you can navigate the numerous challenges together and you get product on time in full. Supplier relationship management has come into its own in recent years, and those that proactively practice it have benefited, whilst those who work in a very transactional spot-purchasing manner have and will continue to struggle.
In the current environment, plan well ahead, even in a market where you know prices are softening or are flat. It’s entirely one thing to be able to get a strike price you are ok with, but entirely another to get it on a vessel and into market on time. An integrated supply chain approach that utilizes a strong, well-founded process will always win over opportunistic purchasing, particularly in the latest current environment that we find ourselves in. We’ve learned some hard lessons in the last four to five years, and that knowledge needs to get integrated into our systems tools and process thinking. You need to integrate processes in a way that is going to help you win more times than you lose, so your customers can count on you.
Get The Newsletter Today!
