Tag: supply chain

Despite the struggling global supply chain, labour shortages and economic difficulties as the world tries to bounce back from COVID, global demand for uncoated freesheet (UFS) grew last year. This is according to a recent report by OPI.

Highlights of the report include:

  • Cutsize paper demand across Europe in 2021 rose by just over 2%
  • Shipments increased about 8%
  • Capacity dropped 7%
  • Buyer inventory levels dropped to their lowest in more than a decade
  • The US market for office paper had a slight recovery versus 2020
  • For the full year of 2021, Mondi reported year-on-year revenue growth of 11% for its Uncoated Fine Paper segment
  • Sylvamo – formerly International Paper’s Printing Papers division – reported sales that were almost 17% higher
  • Portugal-based Navigator benefitted from a surge in demand for its uncoated woodfree (UWF) paper, with sales increasing 23%, while those for the Communications Paper division at Finnish manufacturer UPM grew by 8%
  • Sales at Packaging Corporation of America’s Boise division fell as it was unable to offset rising energy costs.
  • Finland-based Stora Enso reported a decline in revenues for 2021

Continuing pressure due to sustained gas and electricity price rises, supply chain issues and the war in the Ukraine has not helped matters. It appears that the paper industry in one in crisis.

Deon Joubert of Merpak commented as follows:

Our South African paper converting and printing businesses, like so many around the world, are under significant pressure to source supply.

Covid and the resultant drop in demand for, especially uncoated wood-free paper and newsprint, around the world has seen traditional manufacturers of this grade taking commercial downtime, converting paper machines to packaging grades or, in some cases even shutting down permanently.

The post Covid recovery and the return to office has seen demand for these grades grow to the point where it may be that demand now exceeds supply. Combined with the shipping crisis, the resultant explosion in shipping costs, lengthening of shipping lead times and port congestion has battered paper supply chains.

The war in Ukraine has affected energy costs in Western Europe where many of these mills are to be found.

At home, local mills have also suffered from rapidly rising input costs in pulp and chemicals. Demand has been strong and for the past few months some customers have been put on allocation by local mills.

Then the devastating KZN floods have tipped our local supply upside down with all Sappi and Mondi mills in the region suffering flood damage. Mondi has needed to declare force majeure as the Merebank mill was severely damaged and with the lack of municipal power in the Merebank area are yet to completely understand when we may see the start of paper production again.

The effect on printers and paper convertors could be devastating. Just as the world of work and traditional paper communication media was showing some recovery, the price and shortages of paper may well see an accelerated move to digital platforms. Once lost to electronic communication, it is very hard for our industry to return to print.

We are most concerned.

Supply chains suffer in flood aftermath

By Siphelele Dludla for IOL

Image credit: Doctor Ngcobo/African News Agency (ANA)

The business sector has welcomed the declaration of a National State of Disaster to tackle the severe economic impact of the floods which resulted in deaths, damage to infrastructure and loss of production.

Last week’s devastating floods left untold destruction and at least 443 people dead while almost 50 others are unaccounted for.

Business Leadership South Africa (BLSA) yesterday (TUES) said the declaration of a disaster signalled the seriousness with which the government was tackling the task, as well as the lessons learned from the emergency responses in the last few years.

BLSA chief executive Busi Mavuso said urgent lifesaving support must be a priority, but it was important that businesses and the authorities also focus on restoring transport connections.

“The search and recovery effort is clearly the priority, while also bringing immediate relief to those who are vulnerable,” Mavuso said.

“But it is also important that we swiftly deal with the economic impact of the floods, particularly to unlock key logistics routes. The recovery thereafter is going to be critical as we rebuild infrastructure.”

Mavuso said that unnecessary delays in resuming normal operations meant a greater cost to the economy, resulting in lost employment and revenue.

“However, even properly maintained infrastructure cannot meet the effects of climate change,” she said.

President Cyril Ramaphosa on Monday night declared a national state of disaster to ensure an effective response to the extreme weather events.

Extreme flooding in KZN and in some parts of Eastern Cape a week ago left nearly 4 000 homes completely destroyed and more than 8 300 others partially damaged.

It is also estimated that more than 40 000 people have been displaced by the floods.

Supply chains were disrupted as damage to Bayhead Road which handles 13 000 heavy vehicles per day, prevented access to the Port of Durban.

“The damage caused to businesses in the area has not been fully quantified, but assessments so far suggest that the eThekwini Metro accounts for nearly half of all the reported damage,” Ramaphosa said.

“The Port of Durban – which is one of the largest and busiest shipping terminals on the continent and which is vital to our country’s economy – has been severely affected.”

Bank of America’s sub-Saharan Africa economist Tatonga Rusike said agriculture and mining were two key sectors that could be directly affected by disruption at the port.

“Movement of coal exports has already been facing structural constraints with Transnet rail system limiting amount of production volumes,” Rusike said.

“Shipping containers have been displaced and affected Transnet’s decision to halt operations temporarily. The Port of Durban is also a regional hub for goods including vehicle exports and imports for neighboring countries.”

Ramaphosa vowed to prevent corruption, mismanagement and fraud in the R1 billion funding that will be appropriated to provide relief and to rebuild KZN.

Corruption Watch executive director Karam Singh said the best way to ensure that funds were correctly allocated and spent, was to have systems in place that allow government, oversight bodies and civil society to monitor the allocations and spending.

“There must be absolute transparency and full disclosure of how these funds are being distributed, ensuring that they reach the communities for whom they are intended,” Singh said.

“The Auditor-General must be activated to do real time audits of spending, in a potentially effective and appropriate preventative measure that should be used in this instance.”

 

Covid-19, riots hurt Massmart

Source: Supermarket & Retailer

In a trading update on Friday, Massmart said its group sales for the 52-week period amounted to R84.9 billion, which is 1.9% lower than the same period in 2020.

The group, which also owns the Builders and Game brands, said its total comparable stores sales were 1.7% higher, however.

It said 43 of its stores were damaged in the July unrest that took place in KwaZulu-Natal in 2021. However the impact on two Makro stores hit the group’s second-largest sales category hard, resulting in sales declining by 9.7% in the fourth quarter of 2021 compared to the same period in 2020.

That said, Makro’s total sales for the 52 weeks rose by 6.6% to R29 billion and comparable sales increased by 10.6%. Despite the government imposed Covid-19 sales bans, liquor had a comparable sales growth of 39.8%, while comparable general merchandise sales grew by 7.2%.

With regards to food, Makro saw a slight increase in comparable sales of 1.5%.

“Business activity, specifically in the hospitality and catering sector remains at lower-than-normal levels, as this industry was impacted by various levels of trading restrictions as well as international travel restrictions during the year,” said Massmart.

The group’s wholesale and cash-and-carry division, made up of the Jumbo Cash & Carry and Shield brands, had a 6.3% decline, which Massmart attributed to lower sales in the hospitality, restaurant and catering sector due to Covid-19.

Builders, on the other hand, saw a 7.1% increase in total sales.

Game suffered a total sales decline of 8.1% at R15.3 billion, as mall-based foot traffic slowed down as consumers came under financial pressure.

“The Game supply chain was particularly susceptible to unrest related supply chain disruption that resulted in insufficient in-stocks of some core appliances and home electronics in the period following the unrest, exacerbated by lower in-stock levels on key lines of certain electronics and appliance products as a result of global supply shortages,” Massmart said.

 

Consumers panic buy ahead of the festive season

By Given Majola for IOL

More consumers were panic buying ahead of the festive season and 66 percent of them were worried that supply chain disruptions would ruin their holiday shopping plans, according to a new global Oracle Retail consumer research study.

Oracle’s study, which polled 5 728 global consumers in September, showed that supply chain disruptions have left people feeling frustrated and that 66 percent of consumers were worried that this would ruin their holidays. As a result, 28 percent of consumers started their holiday shopping early, while 24 percent said they still planned to start their shopping earlier than usual.

Additionally, 27 percent of respondents were concerned that the items they planned to buy would not be in stock, 28 percent were worried these items would be more expensive and 38 percent feared these items would arrive later than anticipated.

Approximately 34 percent of consumers were considering buying more gift cards this year and this was also the gift 37 percent of respondents said they would want to receive the most.

The study found 26 percent of consumers said they planned to buy more fashion apparel, home goods and electronics. Beauty products were the gift of choice for 26 percent of the respondents, while footwear was hot on their heels for 22 percent of consumers.

 

Why the supply chain is in crisis

By Grace Kay for Business Insider US

America seems to be running out of everything.

Supply-chain bottlenecks caused record shortages of everyday products from household goods and electronics to cars, food, and raw materials.

For shoppers, empty shelves can be jarring, spurring panic-buying sprees. It’s often the first sign people see that something may be wrong with the global supply chain. But, shortages are typically indicators of issues that have plagued the industry for months.

“At this point, shortages are guaranteed,” Jonathan Gold, vice president of supply chain policy at the National Retail Federation, told Insider. “… We’ve been warning consumers to manage their expectations for the holiday shopping season for months now. The fact of the matter is the supply chain is stretched to its limit from end-to-end.”

The supply chain didn’t recover from Covid-19
In 2020, coronavirus shutdowns wreaked havoc on the global supply chain. Since, lingering virus-mitigation measures continue to limit efforts to return the supply chain to pre-pandemic levels.

Several industry players limited worker levels due to fears of the further spread of Covid-19 within the workplaces. In China, port terminals temporarily shuttered as a result of the country’s Covid-19 zero-tolerance policy, spawning backlogs at some of the world’s largest ports.

“From an economic perspective, it’s sort of like a game of musical chairs,” former US trade negotiator Harry Broadman told Insider, pointing to efforts in the US to compete with 24/7 operations at Asian ports. “The world economy is out of sync because parts of it were forced to go offline when the pandemic started and getting all the industry players back in line at the same time is near impossible.”

Demand is soaring
Demand grew so rapidly in the past two years that it’s equivalent to about 50 million new Americans joining the economy, Gold told Insider.

“All parts of the supply chain, most of which are built on ‘lean’ principles (no slack, little redundancy, from truck drivers to inventory in warehouses), were not prepared for this increase,” Pelli told Insider. “While consumer demand can increase in a matter of months, it takes more time to increase port capacity, build warehouses, hire employees, etc., to meet that demand.”

Shortages make it difficult to keep up
Ports, warehouses, and trucking companies are processing more goods than ever while combatting a series of crushing shortages, including workers, equipment, and space.

A lack of chassis and shipping containers has made it even more difficult to transport goods.

Most notably, the national labor shortage has left warehouse companies scrambling for employees and key US ports working with limited manpower.

Two of the largest US ports saw a 30% increase in the amount of goods going through them while processing the cargo with 28% fewer workers. In July, the US Labor Department reported that the warehouse industry had a record 490,000 job openings. Meanwhile, the trucking industry has a shortage of over 80,000 drivers.

With fewer workers to process the goods, shipping yards and warehouses are running out of space, making it increasingly difficult to organize the output of goods to their final destinations.

No end in sight
While the record backlog at Southern California ports represents the most eye-grabbing aspect of the supply-chain crisis, every leg of the industry is in chaos, RBC analyst Mike Tran told Insider. Last week, Moody Analytics warned there will be “dark clouds ahead” for the supply chain.

The only realistic near-term solution would be a cut back on consumer spending, though the prospect seems unlikely.

Experts predict the disruptions will continue well into 2023, despite efforts from the government to mitigate the issue.

COOs and supply chain management are feeling the brunt of an accelerating business environment further complicated by increasing customer demands for efficiency, personalisation, and convenience. Slow manual processes based on inconsistent information across functional areas spell death for modern supply chain management, with an inability to adapt in real time to changing demands leading to sub-par customer service and potential attrition.

To address these risks, companies are increasingly looking to digitise their supply chains by implementing a cloud-based digital platform that optimises traditional ERP processes while integrating new exponential technologies.

Cloud-based platforms that enable real-time decision making based on accurate big data – generated through traditional processes as well as the growing prevalence of sensors – and predictive analytics powered by machine learning is changing the way companies approach supply chain management. Accenture predicts that the SaaS for supply chain management market will reach US$4.4-billion in 2018, driven by a need to simplify and optimise today’s complex global supply chain networks.

The value proposition is clear: studies by the Boston Consulting Group find that leaders in digital supply chain management enjoy increases in product availability of up to 10%, more than 25% faster response times to changes in market demand, and 40%-110% higher operating margins.

The exponential technologies driving supply chain innovation
Big data matched with real-time predictive analytics is enabling large-scale scenario analysis to give COOs the power to conduct accurate demand forecasting, capacity planning, and advanced procurement with a focus on collaborative optimisation. Such breakthroughs in technology allow us to explore more possibilities and their implementations, & to help us in integrating the company. A utilisation analogous to that is that of EsRM, a system used to enhance the security of a company to a very significant extent.

With the adoption of sensor technology in every facet of the supply chain and the availability of reliable all-time localisation through GPS, GSM and Galileo-based positioning gives COOs greater data regarding stock opening, temperature, humidity, and more, allowing greater optimisation of existing processes.

Automation through advanced machine learning algorithms that leverage process and sensor data is gradually leading to near-perfect accuracy in process decision making as human judgement is augmented and, in some cases, replaced. By automating supply chain procurement processes through best practice machine learning, COOs and supply chain managers can eliminate opportunities for error and ensure effective event and risk management based on expert systems.

However, the job of the COO and his supply chain management support to lead the organisation into this exponential future is complicated by the need to manage the implications of digital transformation while simultaneously innovating the underlying business model.

The digital transformation imperative
Digitising the supply chain enables companies to integrate, embed intelligence, and visualise all supply chain processes from supplier to customer. This opens the door to live inventory management through a redesigned data model that finally provides true transparency on inventory flows. Placing a digital core at the centre of all supply chain management processes further enables expansive “what-if” and scenario planning to identify opportunities for meeting potential market demand with high levels of service at low cost.

Manufacturing costs are also reduced as detailed constrained planning and scheduling enables agility within the supply chain and optimises the efficient use of capacity.

A traditional ERP simply cannot keep pace with the rate of change and the need to innovate and optimise quickly, accurately, and cost-effectively. Delivery commitments based on outdated data leading to cancelled or delayed orders; inaccurate order prioritisation resulting in unfulfilled strategic customer orders; and difficulties with addressing last-minute rescheduling by priority customers are only a few of the risks companies face when relying on an outdated technology platform for supply chain decision-making.

The business outcomes of digitising the supply chain
With exponential technologies such as IoT, big data, predictive analytics and machine learning integrated to the SAP S/4HANA digital platform, COOs and supply chain management can leverage rule-based allocation check in a single system to ensure the needs of strategic customers are always met. Up-to-date inventory management ensures realistic fulfilment commitments and real-time order confirmations, with advanced segmentation techniques driving business profitability in unprecedented ways.

The business outcomes can be transformative: reducing days of inventory by 10-12%, reducing revenue loss by 10-15%, cutting total logistics costs by 10-12%, and reducing supply chain planning costs by up to 5%. Critically, digitising the supply chain enables companies to run simpler and shift focus more toward innovation – both in terms of improving existing processes as well as developing entirely new business models and revenue streams.
But with a recent Forrester Business Technographic Survey showing only 27% of supply chain management professionals and 22% of logistics and distribution personnel using or planning to use big data analytics, the real question is: will COOs rise to the challenge of digitising their supply chain in time to adapt to an exponential world?

By Mehmood Khan, chief operating officer at SAP Africa

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