Re-thinking global supply chains: A conversation with Sealand’s Aruna Hussain

Aruna Hussain, Managing Director, Europe and Mediterranean for Sealand sees supply chains changing in a profound way over the next decade

As part of Reuters Events and Maersk’s recent industry-leading research into how global supply chains are being reconfigured post-pandemic, which you can download for free here, we sat down with Aruna Hussain, Managing Director, Europe and Mediterranean for Sealand, a Maersk company, to discuss the future shape of logistics and manufacturing.

This interview has been edited for length and clarity.

Alex Hadwick, Head of Research, Reuters Events, Supply Chain

One thing that has come out in our recent research into global supply chains has been the vulnerability experienced by complex, multi-unit, multi-tiered supply chains, such as automotive, aerospace and electronics to the recent roiling storm of crises.

What have been the lessons learned?

Aruna Hussain, Managing Director, Europe and Mediterranean, Sealand, an A.P. Moller – Maersk company

In terms of the lessons learned, more and more it's becoming what we call the VUCA world: Volatility, Uncertainty, Complexity, Ambiguity. That shift means it’s no longer primarily about cost, it is about the resilience of your supply chain. That's the key thing.

It's about having the final product on the shelf. When you don't have that, it directly impacts your top line

It's about having the final product on the shelf. When you don't have that, it directly impacts your top line. That's a bigger risk, as its impact isn’t just financial, but also reputational, leading to the loss of customers, so these risks must be prioritised and mitigated.

Alex Hadwick

What is the context surrounding supply chains that has driven this change in attitudes?

Aruna Hussain

When you look back at the last few years, not just COVID, but elsewhere, there's been so many disruptions, whether that is political disruptions, natural disasters, or cyber-attacks. I believe there are studies to support that the frequency of such disasters and disruptions has actually increased over the last few years and may continue to increase over time.

That disruption is causing a lot of companies to rethink their entire supply chain strategy, and there is definitely a lot more thought going into a conscious, strategic approach around near-sourcing and shoring to hedge against those risks.

Alex Hadwick

What does this shift mean for different verticals and national industrial bases?

Aruna Hussain

We are definitely seeing trends across different industries in Europe. Within fashion, apparel and lifestyle verticals we see a trend to bring garment and textile manufacturing closer, because these goods are extremely time sensitive. We've seen more sourcing from places like Morocco, Turkey and, to some extent, Egypt.

Then if we talk about household appliances, again we are seeing a bit more of an increase in sourcing from Turkey, as well as Poland.

Finally, in high-end automotive manufacturing, as well as high-end manufacturing in general, we're seeing quite a bit of increase in sourcing from Germany, where there is a high degree of automation and newer manufacturing technologies.

The overall trend is towards flexible production models. In these models, companies are looking to reshore critical components that are absolutely vital to production

However, just in the last couple of months with all the recession and high energy prices etc., there is also some talk of elements in chemical production processes dispersing to places where energy costs are lower.

Therefore, what we see is a little bit of a mix, but the overall trend is towards flexible production models. In these models, companies are looking to reshore critical components that are absolutely vital to production where possible, so as to ensure availability of these, and then hedging the risk for the remainder.

Also, instead of too much reliance on one location, e.g., China, Indonesia, etc., it's going to end up that there's some reliance on these locations, but also trying to find additional suppliers a little bit closer to home, so you're able to minimise the risk of delays or unavailability.

Alex Hadwick

What are the long-term effects of this significant trend for you and Sealand?

Aruna Hussain

Firstly, we are far closer to customers than ever before, and a lot of our conversations are moving from transactional transport discussions towards more strategic partnerships. In these, we sit together and discuss what strategic change companies intend to make in their supply chain and how can we enable that, what consequences do those decisions have for the companies from a supply chain perspective, and how would we bring forward the right products and solutions to enable that for our customers?

When we are talking very short distances – and especially when we want to change something on those short distances – that means we need to be a lot more agile

Another key consideration for most companies when they talk supply chain is going to be how do we speed up? How do we slow down? What options do we have? What flexibility can be offered by supply chain partners and providers to help us with achieving the right inventory outcomes?

This matters because when we have goods coming in from longer distances, there's a lot more time to plan, but when we are talking very short distances – and especially when we want to change something on those short distances – that means we need to be a lot more agile as an organisation. We need to be agile enough to make changes within a matter of hours or days. So, for us in Sealand it's a lot more, and a lot closer, coordination with the customers.

Alex Hadwick

How does that come to the fore when you hit unexpected events in these shorter supply chains, such as when key rail freight lines from the Far East were cut early in 2022, or when the Rhine dropped to extremely low levels in 2022?

Aruna Hussain 

What's really important in these situations is the ability to make decisions faster when exceptions happen, for example to switch the mode of transport quickly or find alternate options to meet expected outcomes for customers.

For example, Spain is the garden of Europe, providing a lot of fruit and vegetables that need to be refrigerated and moved on vessels from the south of Spain. If issues are encountered on the sea route, we need a rapid ability to switch over and move those products by rail and overland to Northern Europe. We recently started a reefer rail service from Spain to the UK and to Northern Europe, for example.

When you talk resilience and exception management, it becomes key that you have the right partners that can provide predictive analytics or visibility of your entire supply chain

That's just one example of how we are able to quickly switch and provide those flexible modes for our customers to be able to get their goods to their customers and end consumers on time.

Likewise, the focus that we have on technology is extremely critical. When you talk resilience and exception management, it becomes key that you have the right partners that can provide predictive analytics or visibility of your entire supply chain, so that we can then manage the changes in a timely manner. Having the right technology really supports the resilience that supply chains need.

Alex Hadwick

You’ve mentioned several core elements that will be important to reconfiguring supply chains for the wave of reshoring and near-sourcing, but what other critical elements do companies need to consider to make this complex shift?

Aruna Hussain 

I think the important thing that companies are struggling with at this point is finding the right suppliers. There aren't that many suppliers available and reliability of suppliers is very, very high on the agenda, because there will be very few suppliers who can cater to all that demand. Many may lack the ability or the capabilities to be able to scale further, or they may even lack financial muscle.

Then, of course, there's also the risk of the political turmoil. We've seen how important that is with the recent situation in Ukraine, which nobody expected to happen in the manner that it did. So, I think economic stability and political stability of the sourcing country are very important elements to consider before we even talk about logistics.

Then, within logistics, the physical infrastructure becomes extremely important. If you look at capacity for moving goods on land, how easy or difficult is it to do so?

Some countries have very old rail infrastructure or insufficient engines and locomotives.

Or in Italy, for instance, trucking is a very fragmented market. If you want to get capacity, then you must work across multiple trucking companies to be able to get even 20 trucks a week. One needs good partners to be able to manage that.

You also need to have the right customs environment. Within the EU, it may not be a problem, but with Brexit - UK to EU - or from places just outside of the EU, where they may be shipping into or from Europe, that can be a problem, especially when overall lead times and customs clearance timelines are such a big part of logistics performance.

In summary, there is not a single, simple solution. One has to look at all the different components within the supply chain to be able to make a decision

Then, warehousing space matters. Poland alone, for example, over the last 10 years has increased warehousing capacity by 20 times due to so much production shifting into the country. Similarly, the ability to have consolidation points, cross docks and inland depots can be important to enable smooth flow of goods.

The overall physical, technology and process infrastructure around logistics are all major factors to consider.

In summary, there is not a single, simple solution. One has to look at all the different components within the supply chain to be able to make a decision.

Alex Hadwick

Sustainability is also increasingly a consideration for many companies in this discussion. What role do you find it is playing?  

Aruna Hussain 

I think almost every European company has set itself a target to reduce emissions. I also feel a lot of them are trying really hard to get their suppliers to comply to lower emissions across the value chain.

However, that's also proven to be quite difficult in many geographic, locations. When we talk about sourcing happening from, say, Southeast Asia or South Asia, countries in those regions are not necessarily equipped to comply with a lot of the changes that are required in manufacturing processes, and they don't meet some of those sustainability criteria. That's been a battle for a lot of these companies.

However, companies in Europe are better equipped able to have those processes and those standards in place. That's actually a good positive case for reshoring from a sustainability point of view, alongside the obvious emission reductions that come from reducing distance travelled and being able to shift trucking movements over to sea and rail.

Alex Hadwick

Aruna, thank you for your time and insights.

You can download the “A generational shift in sourcing strategy: A global and European deep dive into near-sourcing, nearshoring and reshoring in the post-pandemic world” here now and understand the drivers of change and the consequences of this mega-trend.

About Sealand

Sealand – A Maersk company is an integrator division of Maersk. Sealand connects global and regional supply chains, offering the right fit to turn near-sourcing challenges into business opportunities thanks to its fast and agile way of working.

Sealand complements the global value propositions of Maersk by applying regional expertise to distribution and last/first-leg supply chain needs. Near-sourcing has elevated the need for full cycle providers that can both move cargo, physically handle cargo and provide instant visibility to flows throughout the supply chain. Sealand offers that unique value proposition as intra-European logistics specialist.

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