Let`s go glocal - experience sharing about local & global supply chain challenges

Dear followers of my blog and readers of my posts. It is time again for sharing some personal & professional experiences, which I have mainly made during the last 10 years, with You. 

The idea to do so came up in my head this morning, when I read newspaper articles about the problem with the big container ship blocking the Suez canal right now after an accident and the  massive delay of deliveries of goods from Asia to Europe resulting from this. 

Actually I called immediately my Vulkan do Brasil management team colleague Christoph Kuehnel, our Purchasing & Foreign Trade Director, and asked him, whether he thought that this could strike us.

Fortunately Christoph, who already had verified this in detail with his team of colaborators, calmed me down. So far no risk of delays for our supply stream of raw materials, components and finished products from our Vulkan Group sister plants in India and China and from several suppliers in China, Corea and India to our factory in Itatiba, Sao Paulo, was apparent. 

Also our own deliveries of couplings, brakes and backstops to lots of customers in the mining, steel, cement, sugar, paper, energy generation and many other industries in Asia and Australia are - thank God - so far not affected by the blockage of the Suez canal.

Since 2015 - going along with the strong growth of our sales of products manufactured at our beautiful factory in Itatiba, Sao Paulo, to customers all-over Latin America, incl. Mexico, Central America, the Caribbean, all South American countries, the USA & Canada, Africa, Europe and Asia, we have optimized our supply chain tremendously.

For companies manufacturing their products in Brazil - besides many other challenges and disadvantages, which this beautiful country and it`s ruthless politicians endlessly invent for us - the currency exchange rate between the Brazilian local currency Real and the international "hard currencies" USD and Euro, in which we pay all our foreign raw material, component and finished product purchases and in which our global customers pay the products and services, which they buy from us, is extremely influental. 

What makes the whole story even more challenging, is the fact that with the unpredictable and thus not projectable currency exchange rate fluctuations due to the sometimes abrupt devaluation and/or valuation of our Brazilian currency in comparison to the USD and the Euro, supply chain, purchasing and sales strategies have to be almost constantly adjusted and optimized. This is one of the big differences which I learned 25 years ago, when I left Europe for Brazil and later-on for Mexico, where I lived and worked during the 6 years from 2003 until 2009, before I finally moved back to Brazil.

Sometimes it is really difficult for executives in Latin American subsidiaries of European, North American and/or Asian companies, to find the right understanding in their dialogue and reporting to their group headquarters for this very particular local business situation and the extreme dependency of our business and business performance on the very often quickly and dramatically changing economic and political environments. But this makes part of our missions and does also open lots of wonderful business opportunities. And it keeps us from getting bored and holds us awake.

During the last years we at Vulkan do Brasil have become quite experienced and successful with this. We constantly monitor all the local, regional and global economic and political environment factors which are influencing our business and we have quite often adjusted our supply chain, purchasing and selling strategies. A couple of years ago, we have practically decided to nationalize the purchase of all raw materials and components, which we can find on the Brazilian market. 

This strategy was very successful and we have had two major advantages so far since the beginning of the Covid-19 crisis. First of all we did not suffer any interruption of our raw material and component supplies so far. And secondly we could avoid great part of the massive cost increase for Brazilian customers of international suppliers just due to the huge devaluation of our local Brazilian currency. 

Christoph is one of the key players involved in all these processes and activities. We know each other since mid of 2013, when I hired him as our new Purchasing Manager at the GEA Heat Exchangers (today: Kelvion) factory in Franco da Rocha, Sao Paulo, where I was employed as Managing Director at that time.

The circumstances of Christoph`s hiring at GEA Heat Exchangers in fact were quite funny and we always laugh, when we talk about it. At that time, within the complete restructuring and turnaround process, which I executed at our factory in Franco da Rocha, I was looking for a new Purchasing Director and in the final interview round I talked to several experienced candidates. But Christoph, besides his evident highly professional experience and the first-class references from his former employer ThyssenKrupp in Campo Limpo, Sao Paulo, was different to all other candidates because of his personal profile and development history.

Actually Christoph as a young man had decided to emigrate to Japan and to earn money there with all kinds of service jobs in restaurants. And after a few years he moved away from there to London, where he became hired as barman in a pub for some time. But quite soon he came to the conclusion, that this was not the kind of career and job, which he really wanted to do for the future and he decided to move back to Brazil for studying and getting started as an employee in industrial companies. And that`s how his professional career as supply chain specialist started. 

For me it was very fascinating to have Christoph with us in our management team. Exactly because he brought along a lot of very different and very practical experiences, which I valuated very high for our extremely challenging restructuring and turnaround project at GEA Heat Exchangers in Franco da Rocha.

Shortly before I left GEA Heat Exchangers for taking over my new position at Vulkan do Brasil in Itatiba, Sao Paulo, I personally negociated the biggest customer order since ever for our Brazilian company. Within this purchase order on hand, we had to design, manufacture and supply around 50 different big and heavy heat exchangers for two deep sea oil exploration platforms for Petrobras. These heat exchangers required the fulfillment of the worldwide highest engineering standards and had to be built in different steel materials like Duplex and Super Duplex, which require high experience and special technology for welding. We needed to purchase big quantities of seamless stainless and carbon steel tubes of different lengths and diameters. 

Immediately after the signature of the contract with the Brazilian EPC customer, I invited Christoph to accompany me during several business travels to China, where we looked up and audited lots of different local manufacturers of tubes and forgings. We travelled to many cities there and finally found first class material suppliers for the huge quantities of tubes and forgings, which we urgently needed and we placed purchase orders of several million US Dollars for all these materials there.

To shorten the story - everything went 100% right. All materials had been delivered in the agreed upon delivery times and without any major quality defects. We built and delivered all heat exchangers and they were delivered to our EPC customer, built into the process modules and installed on the platforms. Today both platforms (P75 and P77) are producing pre-salt deep sea oil (5000 meters below sea level) for Petrobras.

With this excelent and successful background it was no question for me, that I wanted Christoph to join me at my new company Vulkan do Brasil, where I was about to initiate a quite similar restructuring and turnaround project. And for my satisfaction, Christoph immediately accepted my proposal. And since then Christoph is Vulkan do Brasil`s Purchasing & Foreign Trade Director.

During the last years - as mentioned at the beginning of this post - we have nationalized lots of raw materials and components, which we formerly had purchased mainly on the Asian markets at interesting prizes, but with the disadvantages of the necessary pre-financing, quite high volume orders, much longer lead times (until landed at our factory) and with difficulties to do close follow up and auditing of the foreign suppliers. This was a lot of work for Christoph, his purchasing team and our colleagues from our QC department, but they altogether managed this perfectly and we are really very happy now with the results. 

On the other hand we have during this period of meanwhile more than 6 years strenghened our relationship to most of our suppliers and established very close colaboration with them, so that we can in very agile processes show, that not all "impossible missions" are really impossible and this has given us an enormous reputation and attractivity for our customers. The heavy industry like mining, cement, steel, but also others like Sugar & Ethanol mills, paper factories, power generation plants sometimes have extreme urgencies and to attend these properly and to find perfect technical solutions for our customers even during very limited time windows has become one of Vulkan do Brasil`s specialities.

I hope that this was interesting for You and I am - like always - highly interested in Your own comments and experience sharing. Look us up in our social media (Vulkan Do Brasil, Vulkan Drive Tech Latam, Vulkan Southern Hemisphere, Vulkan Africa) and contact us whenever we can help You solve problems and find solutions.

Enjoy the rest of this wonderful weekend - at least here at my home in Vinhedo, Sao Paulo - and take care. Stay healthy, happy and successful.