How the supply crisis affects the Horeca sector

Sharing ideas with leading figures from companies within the Horeca sector, Javier Toral Nistal, CEO of QualityFry, discussed at Expo FoodService the issues  of the Supply Crisis and how it affects the value chain.

Concern about this new crisis is common in all sectors and it is a general feeling that is affecting several countries. Participating in the discussion: Federico del Pino, CEO Italian Machines; Javier Toral Nistal, CEO of QualityFry; Rafael Olmos, CEO of Zummo; Sergio Isabel, commercial director of Repagas; and moderated by Azucena Rodríguez, co-founder of Dosilet by InterCook Solutions,

To have a global vision, Javier Toral makes a quick review of history to understand that we are facing thefourth major logistics crisis in the world. The The first crisis was in 1989 in Panama, when General Noriega was in command of the country. The USA invaded the country to retain control of the Panama Canal Zone. They called this operation “Operation Just Cause; then in 2003, another more or less similar event, the invasion of Iraq in Kuwait due to an oil dispute in the Gulfcarried out by Saddam Hussein was a very important logistical problem, the name of the operation was also very curious, “Operation New Dawn”, and the last one was in 2021 when the Ever Given, a freight transport ship, ran aground in the middle of the canal, due to a sandstorm and strong wind, blocking from side to side the passage of any other vessel creating a traffic of kilometers, considering that this is the way for 12% of all world trade was a major crisis. Although these three crises were resolved fairly quickly.

The great enemy of logistics is the bottleneck

When the Covid-19 virus pandemic arrives, it generates a huge logistics crisis with a bottleneck to analyze. “First of all, there are a thousand ships in the world and to make more ships it takes 6 years for each ship. The 8 largest container ports in the world are in China, out of a total of 500 ports, the second largest bottleneck. Third, 9 out of 10 things that move in the world have a component that is produced either in China or Taiwan or Korea.”.

The slow or poor delivery of components for manufacturing means that the manufacturing and delivery capacity is affected in large proportions. “The logistics problem means that we who are the manufacturer, and they who are the customer, have to start thinking differently. We are going to have to cross the desert, which will possibly take us more than a year, in which we as manufacturers will have to make predictions about what we think the customer is going to need and try to refine as much as possible to be able to manufacture and have have stock. Stock that we are going to have to distribute throughout the value chain. Until now the stock belonged to the manufacturer, now it will be held by the distributors, sub-distributors, installers and others involved in order to meet deliveries. We will cross the desert until we get those two gears back in sync and everything flows again, but it is going to be a tough year.”

On the other hand, Sergio Isabel, commercial director of Repagas, analyzed that the problem is of a very important magnitude, since “we program from one year to the next and right now we cannot meet the deadlines”, stressing that they must be more coordinated never.

The role of public administrations

“The Administrations have a spectacular role, much more important than they think and of course more than we think. Offshoring does not come as a consequence of cheaper labour, it may be, but it must also be measured in terms of productivity. You have to analyze the productivity of the factors and analyzing this, we are exactly as productive as they are, there is not a big difference between China and any European country”.

The problem arises when the playing field is not the same for all manufacturers. In the case of manufacturers in Europe it is completely controlled and demanding. “We have environmental regulations of an extraordinary level of demand that implies between 5 and 7% of our costs; In addition to that, we have to comply with very demanding regulations regarding the rights of our workers, which in other places do not exist, they use child labor, in Europe it is unthinkable; and finally the and, finally,user safety,we manufacture things that have to be safe for users and have seals such as the CE, in another place, even if they do not comply with the regulations, they put the CE sticker for you”.

“The Public Administration does not use the tariff for what it really serves, the tariff is not equal conditions, it is equal playing fields. In China they manufacture cheaper, but not with the same rules of the game as us. If the rules of the game are not the same, we start imposing tariffs and if they are still cheaper, great, we would all go to manufacture there. But be careful, I think we don’t need it because if we start playing with the same rules of the game, it might turn out that it’s cheaper to manufacture in Spain or Poland or Italy”.

“And the playing field is defined in the world trade organization, that is where it is decided, but they do not require everyone to comply with environmental, rights and safety regulations and that is the problem, it is what we must demand from the authorities from here and those who are in Brussels to have a playing field that is the same for everyone”.

Rafael Olmos also encouraged sweeping home, explaining that it is the perfect time to “give value to our product, making it clear that it is local and quality products”. Sergio Isabel concluded that the administrations do not collaborate and that everything is imposed from Brussels: “We should press together because right now we are helpless. A global relocation is coming, we are all involved in that”.

“This is about reindustrialization, we cannot lose another 10 years”,concludes Javier Toral, CEO of QualityFry.