Keeping an overview: global supply chains during the pandemic

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The pandemic continues to severely disrupt global supply chains – from transport issues to staffing absences, nearly all sectors of the economy have been affected in some way. This includes resource scarcity, which describes both the current shortage of components and the situation in the logistics and container industry.

Here, Gordon Raschig, Head of Supply Chain Management at the IP phone manufacturer, Snom, offers some insight into the nightmare of the last 24 months. 

The avalanche principle

Until the end of 2019, worldwide delivery times were easy to plan. The interlocking of supply chains via perfectly coordinated transport routes had made it possible for companies to deploy a just-in-time production system and optimise transport and storage costs. But the efficiencies and certainties of global manufacturing came to an abrupt end two years ago.

During a three-month hard lockdown in China at the start of 2020, ports were shut, borders were closed, planes were grounded, and the manufacturing world come to a complete standstill. This created a serious imbalance in the global distribution of containers; to this day, masses of containers continue to be stored in ports when they are urgently needed elsewhere. 

When the manufacturing world is finely tuned to a just-in-time production clock, enormous backlogs can develop at great speeds. Raw materials, semiconductors, and other vital components for industry were in short supply – similarly, the availability of protective masks, rapid tests and medication also fell well short of what was needed. 

In April 2021, global supply chains were beginning to return to some semblance of normality, when the Suez Canal was blocked by the Ever Given container ship. The freighter’s week-long entrapment caused estimated economic damage of up to $10 billion, and set the world’s production lines back immeasurably. To this day, these delays have not been resolved. In Germany, container ships continue to be diverted to Bremerhaven and Wilhelmshaven at short notice – ports with limited infrastructure and capacity to meet the increased demand, which causes additional delays of up to two weeks.  

Airfreight – a market with equivalent capacity to sea freight – has also experienced numerous bottlenecks. By mid-2020, despite the higher costs, most companies were willing to switch to airfreight transport routes. But the transport volume of the few cargo planes that were allowed to fly was required to deliver basic medical care to various countries. Space on these planes could only be grabbed at the last minute and at a much higher price.

Supply and demand

Ongoing congestion not only leads to current disruptions to supply chains and production lines, but also to a veritable price war in the sea freight market. While the cost of shipping a 40-foot container from the Chinese port of Yantian to Hamburg was €2,000 in 2019, there have been recent quotes of up to €22,000 for the same container. Even at these eye-watering prices, clients cannot be certain that their containers will actually leave the port on the agreed day due to congestion. 

This can sometimes lead to situations similar to a bazaar, where only the highest bidder – or the one with the largest volume of orders – wins.“ With the current situation, it’s not uncommon for the customer to only learn on the day of departure whether the goods are actually on the ship,” explains Raschig.  

In addition to handling the backlog, another factor contributing to the general shortage of cargo ships is the requirement for freighters to reduce their CO2 emissions. But in the current climate, shipping companies are in no hurry to accelerate investment in the conversion of their ships because, despite the huge price increase, containers and ships are always overbooked.  

The icing on the cake

Anyone who thinks the uncertainties in logistics will soon be eradicated is mistaken. China’s current zero-Covid policy repeatedly leads to partial or complete closure of ports, including Ningbo, Zhoushan (Wuhan) and Yantian (Shenzhen). Quarantining rules mean that if a port is classified as a risk area, lorry drivers must isolate for two weeks, causing increased backlogs and delays.  

Challenge accepted

“The easing of conditions in terms of both availability of resources and capacities to transport goods from A to B has been a long time coming”, says Raschig, but he looks at the situation as a positive challenge. “Now we have the opportunity to adapt our supply chains – to be better prepared to master conflicts between availability and economic efficiency in the future. 

“Of course, we are very lucky to have the support of our parent company Vtech. We have generally come closer together over the past two years. We’re benefitting from the synergies of long-term contracts, and from the distribution of shipping volumes across several partners. We’re always looking for ways to optimise delivery times for both imports and exports, and now we use the entire portfolio,” explains Raschig. 

In addition, Snom focused on transport alternatives such as rail and sea/air combinations early on and now has a large network of transport and logistics companies at its disposal. As a result, the company was able to provide goods for project businesses and customised products with delivery times of less than a month – from a product portfolio of 146 items, only 7 are currently not shippable. Thanks to the success of this strategy, Snom has able to avoid passing on higher transportation costs to its customer, despite the general explosion of prices in logistics.

“The reliability of supply across the entire value chain is the challenge we’re currently facing,” says Raschig. “In the mid-term, we’re of course working on sustainable processes of change in the organisation of our supply chains, which should primarily increase transparency for our business partners. Together with our logistics network, we will contribute to the success of our sales partners.“

Gordon Raschig

Gordon Raschig has been working with Snom since 2008. After various roles across sales and shipping departments, he developed a passion for logistics, which he has been successfully managing since 2018. 

About Snom

With over 10 million devices installed and offices in the Benelux, the UK, France, Italy, Russia, Spain and South Africa, Snom Technology is a globally recognised manufacturer of IP telecommunications solutions for professional use. 

Founded in 1997 and part of the VTech Group since 2016, the company continues to design and develop its products in Berlin and attaches great importance to quality and safety. Snom uses its 25 years of experience and innovative strength to tackle new mobility challenges and increasing digitalisation with cutting-edge technologies that are adapted to all communication needs and environments.

The company’s worldwide sales network includes many renowned distributors and over 10,000 specialist dealers. They benefit from a dedicated partner program as well as personal remote and on-site support services that, alongside its leading technology, contribute to Snom’s outstanding international reputation.

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