A perfect storm for European distribution

A perfect storm for European distribution
Interviews |
Nick Flaherty talks to Pete Malpas and Andy Keenan at RS Components about the challenges of Covid-19 and Brexit
By Nick Flaherty

Share:

The last year has been challenging for the distribution industry across Europe keeping supplies flowing during with the Covid-19 pandemic. The last few weeks have added on Brexit with the UK leaving the EU and lorries held up at Dover and Calais.  

“We are very focussed on the front end design and not so caught up in the production quantities,” said Pete Malpas, vice president for the EMEA region (above) who was previously head of northern Europe. “We have a product situation that is very broad but relatively quite shallow. We don’t get into the mass production so we are managing our supply chain.”

This means the UK leaving the EU has a similar impact to Covid-19.

“We have made decisions more than twice to prepare for Brexit,” said Malpas. “There’s a lot going on at the moment. For example, [global logistics company] DB Schenker suspended deliveries into the UK with implications for automotive shipments.”

Those decisions involved increasing stock levels in multiple distribution warehouses.

“Like many companies we prepared several times for Brexit. We are in a fortunate position where we have multiple stocking locations around the world, and we made the decision early to increase our inventory with around £27m across EMEA,” he said. “We never really took that out, and having that additional inventory really helped. As we headed to the end of the year we put additional inventory in again in multiple locations to help mitigate against any eventuality.

“We’ve had a cross function team working on this for several years and we breathed  sigh of relief with a deal at the 12th hour. We serve the DACH [German and central European markets] from Bad Hersfeld in Germany and where we have cross border shipments we moved from road to air – there are implications with that but we are seeing no issues at all with that,” he said.

Next: Logistics issues for distribution 


“The issue is road movement and that changes by the day,” said Malpas. “There’s issues at UK customs and for vehicles a number of issues anywhere from 4 to 24 hours. Once goods are landing in markets it depends on the automation of their customs clearance – we have a broad spread of product codes so that’s labour intensive – France is very good, they work very efficiently, Italy is working very well.”

“The two challenges at the moment are in Germany, but the level of line information that is being requested is slowing everyone down  and the other issue is Ireland – trying to get stuff across the water into Ireland is proving tricky, but it is improving day by day. It was taking 6 to 7 days but the backlog is easing,” he said.

“The Covid-19 implications on top of the Brexit implications are just another thing to deal with. Our manpower is down from infections and social distancing so it’s a bit of a perfect storm but overall we are doing well – its easy for companies to have the rhetoric but Covid-19 has shone a light on that and it makes strong relationships more important – we put systems in place if anyone was impacted with their orders we were proactive on explaining what happened and how it was progressing and we placed a warning message on the website.

“We made a decision in certain markets last week to take the service messages down, in all but the German and Ireland so we are managing a bad situation quite well I think.”

Chip shortages  

Then there’s been the chip shortages for the automotive market across Europe.

“Car makers are not a major focus for us, that said there’s impact to the supply chain and the whole European landscape – its understanding the impact and making sure we are aligned, how it will impact capacity and supply and what they are developing going forward,” said Andty Keenan, VP Global Product and Supplier Management for Electronics at RS.

“Yes, its going to have an impact with the importance of those customers but its not clear yet what that is. There’s already variation in the supply chain and a chunk of that will continue to be impacted – it’s a watching brief. We know Infineon are quoting allocation for a large proportion of their products, so that knocks onto other customers.

“Our business is more industrially focussed and we have very strong strategic relationships to ensure the impact is kept to a minimum. We are seeding the market, preparing the custom base for tomorrow and they do not want to ignore that while supporting their important automotive customers. We are very good at problem solving with our suppliers,” he said.

However Malpas is upbeat about the opportunities for distribution, despite the prospect of shortages in the coming year.

“Everyone is aware of the cyclical nature of the business and we are certainly seeing very encouraging market conditions over all, demand is increasing and the order book is better than any time in the last 18, 24 months,” he said. “From a technology perspective, general automation and control and development arena we are seeing a high demand, IoT naturally but sensing technology is very hot for us. This is linked to some degree the M2M connectivity is certainly and area when talking to design and R&D engineers, those are the areas that we are seeing the increased demand.

“There is an inevitability in the cycle that lead times are extending and we have to manage that carefully.”

Those shortages are not just chips. “In the short term what’s more constrained is semiconductor related, power management, microcontrollers particularly, and very extended lead times and allocation being used,” said Keenan. “There are also constraints for raw materials, iron oxide is a concern today, we were speaking to a supplier yesterday on this for indictors, transformers, because of supply issues between China and Australia, so there’s a whole range of supply chain issues.

That was a key reason for moving staff to Munich, he says.

“The move to Munich is about access for suppliers,” said Keenan. “Munich is a hotbed for electronics, all our competitors and suppliers are here. We wanted to be closer to the supplier community and generally in the heart of what’s happening in the community for the leadership team. That said, the product management engine room for what the offer is, launching and managing all that is still based in the UK

“We need people both the UK and Munich but not one area more than another. Managing suppliers is more resource intensive than product management so there will probably be need for more resource to manage that, but as we scale up I see the need to invest in both areas.

Working remotely has changed that, says Malpas.

“The last nine months has shown that location is less important for us,” he said. “The North American market is also really important and we are making strategic investments for penetration of electronics as part of Allied.”

The importance of data  

Moving out of the EU has potential implications for data handling as well, which is at the heart of the distribution business.

“The one thing we are not short of is data GDPR aside, we are very strong on GDPR, we have data champions in every market,” said Malpas. “We have a data driven initiative in the business and we try to be data driven. But we are data rich and insight poor, that’s measured by the art of the possible. We are very good at providing data on what happened, but we are focussing in what will happen, whether that’s stock, suppliers, customers, there’s so many areas.  A big element of that is around systems and technology and that’s a big issue for us,” he said.

“We don’t want to be a UK company doing business overseas, we are an international company, the data teams are EMEA teams and global teams, and in that journey to be truly insight driven we are making good progress. There’s so much we can learn from the retailers, they are having to completely rethink their models and there’s a lot we can use from them, stress model the impact of the pandemic on certain industries for example.”

We use data to inform our strategies and plans and ensure we remain customer centric around our decision making,” said Keenan. “We continue to be more and more data centric and the quality of the insight is pertinent to that. Websites are a tremendous source of data, and we have DesignSpark  with over 3m users, and that allows us to look at trends and look ahead at what we should be working on, not just electronics but electrical and mechanics, and we use the data from that platform to complement what we are using.”

“There are other cross border data issues but we are not envisaging any significant issues,” said Malpas. “We are supersensitive around those areas and are careful not to do anything inappropriate with that data. In a broader sense we are very conscious of the risks but we don’t see it as a limitation on our ability to create insight. At the moment we are full steam ahead.

That has implications for hiring, and the company has set up a data academy in-house to boost the data and machine learning skills of staff.

“The only significant area [of hiring] that comes to mind is around data science,” he said. “It’s not that the expertise doesn’t exist, it’s having an awareness of the possibilities. So we started a data academy in house 18 months ago and in that area AI will help us,” he added.

RS Components is part of Electrocomponents

Related distribution articles 

Other articles on eeNews Europe 

Linked Articles
eeNews Europe
10s