If only getting stuff from A to B was as simple as it sounds. Delivering drill rigs and their spare parts to some of the most remote locations on earth has never been easy. But add in a global shortage of key components, bottlenecks in transportation, COVID-19, soaring material prices and a software upgrade at a key distribution centre that went awry, and it’s a wonder that Robert Van der Waal of Sandvik Mining and Rock Solutions, can get any sleep at night.
“In 20 years I’ve never seen anything like it, the whole world of logistics has been turned upside down. We just need to figure out how best to operate in this new dynamic. Some of the problems are out of our hands, but others we brought on ourselves – like a necessary – but challenging – introduction of a new warehouse management system at our central distribution centre in Eindhoven, Netherlands, where the majority of our parts are stocked.
“Our customers were undoubtedly inconvenienced, but thankfully have been remarkably understanding. Now that we are back on track, we can reshape our supply chain to suit the new environment, with the support of up-to-date systems.”
This is already happening, with the Eindhoven facility now pushing out 40% more volume than before the system upgrade. Even products stuck in ports such as California’s Long Beach and China’s Yantian are slowly moving through the supply chain. Geopolitics also is causing headaches, such as Mali closing its borders after the recent military takeover, meaning mines can’t be supplied via standard routes. And Covid-19 rules continue to change as the pandemic evolves.
You only need to see a delay in supplying parts to realise just how important they are to customers,” says Robert. “They need spare parts to keep operating their mines – and it’s a pain you can’t ignore. So, we have changed our shipping methods. In the past we sent 40% by air, 40% by sea and 20% by road – now as much as 70% of parts are being flown in. This is faster but the costs are enormous. But we have no choice – it’s a price worth paying to keep customers satisfied.”
Delay and costs both up
It’s not just the cost of freight that is going up, everything seems to be – from simple screws and bolts, to the wood used for packaging. Ocean freight prices in particular have skyrocketed – a shortage of ships means that container prices have shot up, from roughly $2,000 a container a few years ago to as much as $18,000 today. Sandvik is absorbing much of these increases, but the pressure on costs is intense. That said, there are some problems that even money can’t fix. The global shortage of semi-conductors is hitting electronic component suppliers, causing delays for the whole industry, and this is unlikely to ease any time soon, believes Robert.
Back to basics
New technology and processes undoubtedly have a role to play in ensuring Sandvik’s parts and equipment get to where they are needed. But rather than take big leaps of faith in new technologies (such as Artificial Intelligence), Van der Waal is counselling caution, and a more ‘back to basics’ approach. He counsels the use of the philosophy that it’s better to take one step backward in the short term in order to take two steps forward in the future.
“This last year has shown us – painfully – what happens when we lose control of our processes,” Robert concludes. “We have to get the old-school basics of logistics right first, have good relationships with our suppliers and put robust contingency plans in place if situations change unexpectedly. New technology is going to play an important part in our future success, but we will only take steps we know we can manage – no more leaps of faith in IT. Getting parts to our customers on time is too important a priority to take risks with.”