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. Add in a global shortage of key components, bottlenecks in transportation, COVID-19, and soaring material prices, and deliveries have been made even more challenging.
Robert Van der Waal is the vice president of logistics at the parts and services division within Sandvik Mining and Rock Solutions. His job is to make sense of all the madness in the logistics sector and ensure that customers get the parts they need, where, and when they need them. Van der Waal's resume includes a spell at DHL, and for the last dozen years, he's been a senior executive at Samsung – both companies that know a thing or two about efficient supply chains.
"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," says Van der Waal. "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."
Port bottlenecks are already happening, with the Eindhoven facility now pushing out 40 percent more volume than before the system upgrade. Products stuck in ports such as California's Long Beach and China's Yantian are slowly moving through the supply chain. Geopolitics is also causing headaches, such as Mali closing its borders after the recent military takeover which means that 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 realize just how important they are to customers," says Van der Waal. "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 percent by air, 40 percent by sea and 20 percent by road – now as much as 70 percent 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 while availability down
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 Van der Waal believes.
"I think the ball-park figure is that things now take twice as long as before," says Van der Waal. "Even express courier services that used to be guaranteed next day delivery can now take two days."
Van der Waal believes that just-in-time logistics isn't dead yet. He thinks that supply chains need to switch from a focus on efficiency to a focus on being robust so that suppliers can manage further market disruptions and unexpected disturbances in the future.
Turning back to basics is the key to Sandvik's success
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 taking 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," he says. "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."