Firms should prepare for further supply chain shocks, says Port of Rotterdam treasury lead

Tim de Knegt, treasury and strategic finance manager at Port of Rotterdam, made the comments during The Global Treasurer’s latest Future in Focus discussion, which was led by Victoria Claverie, managing director and head of trade Europe at Standard Chartered.

The panel also included Julie Fabris, global director, FP&A and treasurer at child safety equipment manufacturer Britax.

During the conversation, the panellists also drilled down into the issue of supply chain sustainability. As well as emphasising the role of banks in supply chain management, the panellists also stressed the need for clear, consistent standards to meet the targets of the new green agenda.

As has been widely reported, firms across Europe have suffered numerous supply chain problems during recent months, with the chaos of the pandemic exacerbated by uncertainties around Brexit.

In the UK, this has manifested itself in soaring prices, late deliveries, and yawning gaps on supermarket shelves. In October, it was revealed that UK manufacturers were facing their worst supply chain issues since the mid-1970s, a period of steep economic decline for the country.

With the Omicron variant threatening further lockdowns and restrictions in most European countries, de Knegt believes the structural problems blighting the global supply chain will lead to further disruption.

“One of the major learnings we’ve had from the supply chain squeeze is that it’s happened ad hoc,” he told the panel. “The lack of integration means that it will most likely happen more often going forward.”

This prospect, he added, highlights the need to be “more flexible, a lot nimbler, as companies… but at the same time work much closer together with the parties within the supply chain.

“We need to really understand what is happening in our supply chain to be able to identify those elements where hiccups might occur. How can we identify them? How can we ensure we tackle them in the right manner so the extent that we see today will not happen in the future?”

De Knegt’s comments echo widespread research and thought leadership about how to solve ongoing supply chains issues, which have consistently emphasised the need for more joined-up thinking.

In 2019, before the first Covid-19 cases had even emerged, analysts at McKinsey wrote that “companies can and should see the current high-uncertainty environment as a prompt to rethink their supply chains and so make them more resilient.

“For many firms there is a big need to update supply-chain strategies, bring greater flexibility to their operations, and build new structural agility into their organisations.”

Deloitte, meanwhile, concluded that “fragmentation is among the biggest hurdles across the global movement of goods today. A lack of horizontal connectivity across providers, cargo owners, and end customers makes coordination difficult, contributing to systemic industry inefficiency.

“Meeting tomorrow’s rising demand and customer expectations can require ecosystem players and supply chain partners to rethink collaboration to bring efficiency to the network.”

Trying times

While de Knegt highlighted the structural problems blighting supply chains at a global level, Julie Fabris highlighted the turmoil that these issues are creating for companies on the ground.

She noted how Britax, which manufactures car seats, strollers and other childcare equipment, had suffered a “trying time” since the pandemic broke, adding: “We had headwinds on inflationary costs as well as the physicality of getting goods across the water.

“It shows how fragile the supply chain can be when you are so reliant on a particular supplier and certain of our suppliers have come unstuck because they’re suffering with cashflow constraints, because they can’t ship goods.”

‘Banks can help make supply chains sustainable’

On a positive note, however, Fabris added that “when it comes back to Environmental, Social and Governance, and sustainability, this [crisis] has opened doors for our suppliers to collude with us to try and work together – so it’s been reasonably positive.”

Indeed, sustainability has been a key part of the supply chain agenda in recent years. Organisations such as the Consumer Goods Forum have launched their own initiatives to create benchmarks for good practice, while global brands with international supply chains have been working with banks to incorporate ESG criteria by rewarding better-performing suppliers with favourable pricing.

Going forward, Fabris believes banks will have a further role to play in embedding sustainable principles along the supply chain – and this has direct implications for the treasury function.

“I hope there can be more help in that drive forward,” she said. “Treasurers love the Know Your Customer [KYC] process and I think there’s going to be KYC checks done on corporate sustainability going forward.

“I do feel this is going to come in the next couple of years, so it needs to be very much at the forefront of a treasurer’s mind.

“We need to get that information and communicate with the banks, because we are not only going to report on financial performance, we are going to start reporting on sustainability performance as well.”

De Knegt echoed these sentiments, saying: “The role that banks play is a very, very important one, not just from a supplier perspective, but also as banks have a very clear third party-authentication role at facilitating roles within that supply chain.

He believes the main benefit banks can achieve towards sustainability is bringing parties together.

“What you see quite frequently is that, on both sides, there’s different parties, different financiers, different banks – it’s fragmented. So, it’s really about understanding what you’re looking at and bringing these parties together within the supply chain.”

‘How do you measure the impact of ESG initiatives?’

Turning to his own organisation, de Knegt revealed that the Port of Rotterdam has adopted a measurement model developed by the Impact Institute, which helps companies gauge their biodiversity footprint.

“We make use of the Harvard methodology but hopefully, in due course, we will have one methodology that will support us to analyse and envisage where the impact is that our company is making.”

Again, however, there is a greater need for standardisation and joined-up thinking, with clear standards that every company can engage with.

“It’s probably fair to say that we’re doing our bit but when it comes to the reporting, measurement and the financial metrics, it’s a little bit of a minefield out there,” said Fabris.

“If I was to be completely honest, this is something that is not particularly standardised. The carbon emission footprint is one that is easy to tick off, but then other things, for example research and development capabilities, we would like to measure that in a way that you can then demonstrate.

“It would help us to have the confidence that you are getting there and reaching a goal.”