Logistics in the light of market changes

There is a lot of talk at the moment about increases in the prices of raw materials and supplies. This is compounded by delays in transportation due to border closures or additional restrictions. More than 80% of companies have felt the impact of the pandemic on their supply chains. Many manufacturing companies have decided to switch suppliers. How does this look at FCA? 

It is true. The pandemic caused major turbulence in supply chains, changing them for the next few years.  Unpredictability entered most businesses overnight, leaving a legacy that companies are still facing today. And the subsequent economic changes we are seeing are not encouraging. These are challenges that we have to face. 

Last year was very dynamic, not only in terms of raw material price increases themselves, but above all in terms of material shortages. For most of the year, there was a lack of pellets, which are used to produce plastics, and there was a lack of wood, which resulted in delays in the supply of pallets and drums. Steel prices were rising from month to month. I think it is difficult to find product categories where stability of prices was maintained. 

In addition, during the year the cost of transport from China to Poland increased by 400%, with less dynamics in the prices of transport from other regions of the world. All these situations had a direct impact on the implemented purchasing processes at FCA.  

The search for the golden mean was long and unfortunately unsuccessful. One thing remained clear: changing suppliers did not solve the problems.  

…and if that wasn’t enough, the anti-dumping duties imposed on single-mode fibre optic cable manufacturers by the European Commission came into play. Individual reduced duty rates were set: 19.7% and 31.2% for some suppliers. The regulation is effective from 19 November 2021. To what extent has this decision affected FCA’s fibre optic cable offering? 

At the outset, it is worth noting that the European Union initiated two proceedings – the first concerning dumping prices and the second concerning government subsidies for Chinese cable producers. Both proceedings have now been completed and have resulted in the introduction of anti-dumping and countervailing duties, which total 44% for most Chinese producers.  

How has this decision affected FCA? We do not base our offer exclusively on Chinese suppliers. However, as an importer, we consider this regulation to be very unfavourable as it has increased the purchase price and restricted the market. 

So the order among suppliers, despite the EC decision, has been preserved. At least for the moment. And what effects on a wider scale do you think this decision will have? 

First of all, I expect changes in the optical fibre cable market. The anti-dumping duties that have been introduced will certainly have an impact on price increases, but not only. I foresee the appearance of Chinese cable factories in Europe. 

So – changes are ahead of us, but as they say, that is the only thing we can expect. What is most important, however, is what our stakeholders can be sure of – that is, full transparency and openness in communication about the changes. 

Speaking of transparency and therefore responsibility, many companies nowadays attach great importance to sustainable development. What actions does FCA, as a manufacturer, take in this area? 

Environmental responsibility is now firmly embedded in companies’ development strategies. The looming climate crisis is pushing us to change our way of thinking – and to act in ways that can have a real impact on environmental protection. Companies are increasingly aware that they and their products and services have a major impact on the planet and the future. Reducing the negative impacts of their supply chain activities on the external environment is a key example of the activities they carry out. 

At FCA, we are constantly focused on protecting our climate. As a manufacturer, we take full responsibility for all products manufactured in our FCA laboratory, their storage and transport. The ISO 14001 certificate is a confirmation of our eco-activities and our consistent aim to minimise our impact on the environment. Over a year ago, we made the decision to change our packaging, which was the first step towards protecting the planet in the #ekoFCA programme. Since then, we have implemented a number of changes, affecting all the company’s stakeholders: employees, customers, partners.  

Eco-friendly product boxes and order consolidation are not all that we have achieved in terms of eco measures in logistics and production. Last year, we decided to centralise our warehouses. As a result, we gained new warehouse space, in an energy-efficient building, which is confirmed by the Breeam certificate. We are pleased that this type of investment protects the local flora and fauna and supports the biodiversity of the region. The choice of location was therefore very well thought out. 

New challenges probably await with the new warehouse. What does the future hold for the FCA logistics centre? 

The first challenge is already behind us – in February we completed the relocation process. The new location now houses the FCA Central Warehouse and the whole team responsible for the supply chain, that is the Purchasing and Logistics Department. 

The space is huge – we have 5000 m2 of warehouse space and 300 m2 of office space at our disposal. The warehouse is also adapted for high storage, we have over 3500 pallet places. In the remaining part, due to the specification of our goods, we use block storage on the floor.   

The central warehouse in question is located in Targowek and meets all our logistical needs. I would like to point out that we will use the other two warehouses – in Niepołomice and Brzeziny – for specific projects. The modern space will be perfect for the current and future challenges we will face.  And these, in connection with economic changes, will certainly appear soon. 

…and these are economic changes resulting not only from pandemic restrictions or imposed tariffs. The last few days have shown that we must also be prepared for an armed, inter-state conflict, which began with Russia’s attack on Ukraine. What logistical challenges can we face in this situation? 

What we have already noticed in recent days is an increase in interest in stock levels and buffer orders. However, we understand the general concern and try to meet the needs of our customers as far as possible. 

Of course, there are risks associated with the conflict. One of them is the flow of raw materials, which has so far passed through Ukraine. We are talking about the rail route from China, through which 30% of the total volume of supplies on the China-Poland route passes. And although we are not directly affected by this route, we foresee strong difficulties at the terminal in Małaszewice, one of the points on our logistic map. This is where the trains bypassing Ukraine will use. 

Directly, the conflict will affect one of our suppliers. Its factory is located in the northern part of Ukraine, near Kiev, so we are counting on difficulties in deliveries. However, at the moment the scale of orders is small, we have substitutes. We are prepared for temporary difficulties in cooperation with it. 

It is difficult to determine how the conflict in Ukraine will affect logistics companies, and consequently supplies to production companies. Certainly, it will have negative consequences. Closed airspaces and changes in rail transport may cause delays in deliveries. Maritime transport remains unshaken – at least for the moment – in a global perspective. Most routes are far from the site of an armed conflict. 

Iwona Palaszewska – Purchasing and Logistics Director, Production Department Director at FCA – was interviewed by the Marketing Office