Shorter supply chains in Europe will make the adhesive tape business future-proof
Afera’s 5th webinar in COVID-19 lockdown exit series explored strategic reconsiderations of supply chain goals, zeroing in on continuity, transparency, sustainability and flexibility
With the highest number of registrants to date, Afera’s 5th Webinar explored “Considerations about localising and shortening the supply chain in Europe.” 69 Afera Member Company delegates tuned in once again to exchange experiences, knowhow and best practices on Afera’s unique community platform.
“The biweekly Afera webinars of the past 2 months have been highly appreciated by our Members,” commented the Association’s Secretary General, Astrid Lejeune. “The opportunity to hear about the challenges, solutions and considerations of Industry peers regarding specific business topics is extremely valuable in future-proofing their businesses.”
Evert Smit, Afera president and head of R&D at Lohmann GmbH & Co. KG (Germany), added that the “popularity of Afera’s Webinars clearly shows the value for Members of being part of this dedicated industry community. After all, Afera is a unique network in which to exchange with our industry peers within the European tape industry, and it shows its strength now maybe more than ever.” 
E.U. lockdown exit and regulatory developments
Easing lockdowns
Afera Regulatory Affairs Manager Pablo Englebienne described the continuing process of exiting COVID-19 lockdown in most European countries. In the meantime, major outbreaks have been localised in Latin America, Asia (the Middle East, Central, South and Southeast Asia) and Africa, where it is just beginning to spread. The impact of these outbreaks is not yet known.
Creating corridors
Another trend is the opening up of borders to the movement of people across groups of countries to create corridors among neighbouring countries. This is something we will see being implemented in the summer.
Next Generation E.U.
The European Commission has proposed a recovery instrument, Next Generation E.U., with the goal of repairing the social fabric of Europe after the COVID-19 crisis while at the same time protecting the single market and helping rebalance the financial sheets of the different Member States and affected industries. The Initiative consists of a recovery package worth €750 billion on top of the regular budget of €1,110 billion.
A key point of Next Generation E.U. is to ensure that the future of the E.U. is climate-neutral, digital and social and that Europe ends up a strong global player. These are essentially the same goals as the European Green Deal, so recovery goes hand-in-hand with becoming greener. View a factsheet on Next Generation E.U. here.
Auto industry boost
The automotive industry, which has been greatly affected by COVID-19 disruption, is one of the largest markets for the European tape industry. The Spanish multinational Gestamp, which specialises in the development and manufacture of metal components for the automotive industry, is receiving a €200-million loan from the European Investment Bank (EIB) to develop new research lines enabling the production of safer, lighter and therefore more environmentally friendly cars. Mr. Englebienne said that he hoped to see the creation of more E.C. measures for this industry, which employs 14 million people in Europe.
Onshoring of strategic chemical production in Europe
In May, the European Chemical Industry Council (Cefic) Director General Marco Mensink was interviewed by Covestro on the complexity of supply chains and the interconnected nature of the market, specifically how a measure in one area can have an impact very far down the supply chain. He also mentioned the onshoring of strategic chemicals production within the E.U., especially pharmaceuticals.
Adjusted E.C. Work Programme 2020
The E.C. has also announced an adjusted Work Programme for 2020. The priorities that were set at the beginning of the mandate and presented in January 2020 remain valid in addressing today’s challenges. At the same time, with the adjusted Work Programme for 2020, the E.C. is responding to the coronavirus pandemic by refocusing its work and prioritising the actions needed to propel Europe’s recovery and resilience. Most of the sustainability issues linked to the Green Deal are on track. View a factsheet including timetable here.
3 E.C. initiatives linked to the European Green Deal
A draft report on essential requirements within the Packaging and Packaging Waste Directive is being discussed in Afera’s Sustainability Working Group.
E.C. Waste Framework Directive EPR Recommendations for Guidance, a consultants’ report, was released a few weeks ago. As this will have a larger impact, Afera’s Sus-WG is also picking this up.
A new piece of legislation developed as part of the Green Deal is the Chemicals Strategy for Sustainability (toxic-free E.U. environment) framework. This is on track, and the roadmap consultation is now live, with a feedback period from 9 May to 20 June 2020. The Sus-WG is also monitoring this.
ECHA Safer Chemicals Conference
A European Chemicals Agency (ECHA) Safer Chemicals Conference took place on 2 June. It was a live online event but was recorded for viewing on demand. Speakers from IKEA and the European Council of the Paint, Printing Ink and Artists' Colours Industry (CEPE) were included, and topics covered Poison Centre Notification and SCIP, the database for information on Substances of Concern In articles as such or in complex objects (Products) established under the Waste Framework Directive (WFD).
STS BREF
The European BREF STS (the European Commission’s Reference Document on Best Available Techniques on Surface Treatment Using Organic Solvents), adopted in August 2007, covers “adhesive application in the manufacture of abrasives and adhesive tapes,” the latter specifically in Chapter 5, “Manufacturing of Adhesive Tape”. One of the main outputs of the Sevilla Process, the entire BREF has been under revision since late 2014, and because of harmonisation of environmental standards, has an impact on national laws affecting production plants with a use capacity of organic solvents of more than 150 kg/hour or more than 200 tonnes (200,000 kg)/year.
The updated BREF has been finalised but delayed in the process of being translated into national legislation, as priorities have been placed elsewhere during the COVID-19 crisis. Mr. Englebienne and Afera Sus-WG Leader Martijn Verhagen (Lohmann GmbH & Co. KG) will participate in a BREF workshop scheduled for 12 June, after which they will report back to Afera Members any information of relevance.
Mr. Englebienne informed Webinar participants that, with the Sus-WG, he is preparing a list of regulatory developments, requirements and recommendations as a resource for Afera Members. Via Afera Technical Committee Member Axel Hessland (IVK/FEICA), he also shared a 27 May article published by McKinsey entitled “How a post-pandemic stimulus can both create jobs and help the climate”.
Strategic reconsiderations of supply chain choices
One of the topics that came out of the Member Survey conducted in mid-April concerned the strategic reconsiderations of supply chain choices. Like other topics, Members relate this question strongly to the continuing uncertainty about time horizon and impact, as well as the top priority of all companies to optimise business flexibility.
What are the pros and cons of shortening or localising the supply chain in Europe? If we all agree that it was the right thing to do, then why didn’t we do it before? What are new consequences? What is truth and what is myth when it comes to supply chain choices? How does shortening or localising the supply chain in Europe affect sustainability plans? And how does it contribute to the desired business flexibility? From the World Economic Forum to the Harvard Business Review and Logistics Magazine, reassessing supply chain strategies is today’s visible priority. 
4 tape industry leaders describe the acceleration of a pre-existing trend toward localising and shortening of supply chains
Melanie Ott, global business manager of tapes and labels at H.B. Fuller (Germany), which produces adhesives, described from her global sales perspective that some customers are currently ordering more locally, whereas they tend to buy from Asia or other regions outside of Europe. “I think, however, that at the moment it is a bit too early to say if this is a really sustainable trend or a short-term reaction to actual supply issues,” she said.
Laurent Derolez, also serving in a globally oriented position as chairman and CEO of Novacel S.A. (France), a leader in manufacturing surface protective films, technical tapes and machinery, commented, “I think the COVID-19 situation has caused prices merely to amplify the pre-existing trend towards onshoring. Before things were moving a little bit in this direction, and now they are accelerating.” An early proponent of onshoring, having driven Novacel in this direction after the global financial crisis hit in 2008, Mr. Derolez explained that we all want our suppliers close to us, because it is easier to forge partnerships requiring highly technical communication “with someone who lives 500 kilometres away versus 5,000 or more.” And he thinks prices are accelerating this trend, particularly within supply chains.
Philip Guy is the general manager for tape solutions at Saint-Gobain S.A. (France), a company which is 350 years old and produces high-end, specialty adhesive tapes for automotive, aerospace, industrial use and electrical vehicles around the globe. “The shortening of the supply chain is something that has been going on, especially with our customers,” he revealed. “We have been localising through our customers as much as possible, and along with that, we plan local raw material resourcing as much as we can.”
“When I look at the supply chain, there was a trend in place prior to COVID-19 disruption,” said Nitto EMEA (Belgium) President and CEO Sam Strijckmans. Nitto is a producer of intermediate materials such as industrial tape solutions for the B2B market, optical films for consumer electronics, reverse osmosis membranes for water desalination and oligo drugs for the life sciences segment.
The trend he described leading to shortening supply chains was mainly influenced by geopolitical tensions such as the U.S.-China trade conflicts, the boycott of Iran and BREXIT. The onset of the pandemic brought additional factors into play: significantly increasing transportation costs between Europe and Asia; the interruption of materials sourced from some countries, greatly affecting business continuity; and even an increasing number of national “buy local” campaigns. “All these elements have an impact on our supply chain,” Mr. Strijckmans said. “As Ms. Ott said, maybe it is too early to see if the trend is short-term or permanent.”
Turning back the globalisation of business
Mr. Strijckmans went on to describe what he sees as “turning back the globalisation of the business”: Some industries are moving back to Europe. “For a long time, the semiconductor business was moving over to Asia, but over the last few years, we have seen very big investments made in Europe in this segment,” he continued. “Another example is battery production in Europe: There are many ongoing investments in this segment that will provide a lot of opportunities to the tape industry in Europe again.”
Shortening and thickening the chain for security of supply
“The highest general priority of companies at the moment is security of supply,” commented Ms. Ott. “While some companies want to achieve this by choosing for a local supply, others feel that merely using more than one supplier—so having 2 or 3 as backups to spread their risk—is the best way to ensure continuity.” Still others say that building and maintaining long-term relationships with suppliers is key, so there are a few different ways to approach this.
Transparency
The “baptism by fire” digital strides which all companies have made lately will likely go hand-in-hand with increasing transparency in the supply chain. The pressure of digitisation can be seen as an opportunity to make supply chains better industry-wide while maintaining individual competitiveness. “This is being discussed in blockchain technology, for example,” suggested Mr. Strijckmans. “So if the exchange of data becomes increasingly transparent, we will be able to make more logical decisions in terms of supply chain.”
“Digitisation will enable us to shorten our supply chains, because there will be more accurate information on how to source raw materials needed to deliver technical performance required within our products,” added Mr. Guy. “The more open we are and the more digital we are in terms of being able to share some of that information with our supplier businesses, the more we will be able to manufacture similar products in similar regions.”
Customer flexibility and open innovation
The other thing that is fuelling the shortening of supply chains is ever-increasing flexibility from Industry customers. Mr. Guy said that those he works with want less-standard products—items that are tailored just to their applications—and in order to meet this demand, you need to have as short a supply chain as possible. “In simple terms, you are stuck buying such large quantities and bringing them across continents, so the more you can do that is localised—the more flexible you can be to your customers—the smaller the quantities you can work with,” he explained.
A trend in open innovation also links up with business flexibility. “Open innovation discussion, often secured through the signing of bilateral or multilateral NDAs, is brought about by and encourages flexibility,” Mr. Strijckmans commented. “And with such collaboration reinforcing transparency and other improvements in the supply chain, faster access to the market is possible.”
Challenges to localising
One of the issues many global tape-related companies face is standardising parts across regions. “We want them to look the same for our customers who also use them across these regions,” said Mr. Guy. “So when we localise our sourcing of raw materials, we see differences among our products. This is one of the major problems with onshoring, and the COVID-19 crisis has just accelerated our great need to work through this to make the shortening of the chain viable.”
Is changing to a shorter supply chain sustainable?
Having gone local with Novacel’s supply chain over 10 years ago, Mr. Derolez related that if all the KPIs are right—quality, service, technical discussions—there is no reason to move. “After the last financial crisis, we decided to pare down our base of many suppliers to include just those close in proximity that were flexible, consistent and technically fluent—to create a small family with whom we had proper relationships,” he said. “You can only obtain these when you have your suppliers close to you, because you cannot engage in day-to-day exchanges within huge time differences.”
In shortening the chain, Mr. Derolez describes the “win-win situations” companies will create with happier, stronger suppliers who will be more productive and longer-lasting businesses: “I think this was one of the best outcomes we had from the last crisis.” Despite the trends of globalisation and digitisation which many would believe supported building longer supply chains, he will not change his decision to localise: “If we do source some of the elements of our manufactured products—for example, vegetable plastic in South America that enables compliance with European environmental targets—we do it as a team with our lab technicians and the local supplier, not conducting technical conversations with the other side of the world.”
And greener too?
Mr. Guy pointed to the adverse environmental impact of the energy consumed in moving materials across continents. He feels the shortening of supply chains will continue because of the green nature of it. Saint-Gobain has made a pact to be carbon-neutral by 2050. “Some of the materials produced in adhesive tape manufacturing require a lot of energy,” Mr. Guy said. “Looking at the whole lifecycle of the materials—at our suppliers and reducing the actual physical length of those supply chains—will help in reducing the energy being used to make those products.”
Ms. Ott agreed that sustainability issues—especially those being brought to the fore with COVID-19 disruption—will have an impact on the trend of shortening supply chains.
“I am a firm believer in simplifying supply chains, because I think they go hand-in-hand with sustainability,” Mr. Strijckmans offered. “In the past, we have sometimes seen pieces worth a few euros travel around the globe only to return to their place of origin. I believe shorter and speedier supply chains are a positive thing in terms of cost but also environmental impact.” For a number of years already, Nitto has reflected these values in its “area niche top strategy”, in which products are developed and produced in the area where its customers reside. “Price will always be a matter coming into the game... to challenge whether producing locally is also competitive,” he said. “But I think these factors reinforce each other.”
Mr. Derolez suggested that relocalisation of suppliers will greatly help in creating more transparency about availability and other factors within the supply chain, so that companies can comply with European standards. “Europe’s main objective is the Circular Economy, and you need to find suppliers who will guarantee, along with you, the quality and contents of the products to your customers,” he explained. “It is more difficult to do this across continents.”
Business priorities now
“At present, what is your biggest priority for the next 6-12 months, if you had to pick one?” asked moderator and marketing strategist Bert van Loon.
“I feel that sustainability is most important in the long run, but in the timeframe you are talking about, I would say flexibility,” answered Mr. Guy. “This is something that is being driven by our customers, who want us to be much more flexible with our materials, so we need a supply chain that is much more flexible.”
Agreeing that the topic of sustainability would remain high on every European company’s agenda, Mr. Strijckmans said that many customers are guaranteeing the supply chain and the speed of delivery, and many companies are concentrating heavily on cash flow—working capital. “This means that they want small orders faster but less stock on hand to be able to manage their cash flow, so in that sense speed and flexibility are the short-term priorities—together with quality and service, of course.”
Ms. Ott said that she would also vote for flexibility over the short-term. “That means over the next 6 months,” she qualified. “At the moment, no one can offer a reliable forecast, so flexibility—and therefore short delivery times—is the focus.”
“I think if you do not look after your short-term, you will not see the long-term,” Mr. Derolez concluded. “We all find ourselves in exceptional circumstances, so short-term should definitely be the focus.” Mr. Van Loon agreed, adding that “short-term decisions should not become barriers to future long-term decisions.”
Next webinar – register now!
Afera’s next exclusive Webinar in its lockdown exit series “Navigating the COVID-19 crisis within the adhesive tape value chain” will cover ''Innovation: lessons learned from the first months of COVID-19 disruption". It will be held on Thursday, 18 June, 15.00-16.00 CEST. Please register here. A 7th Webinar discussing “Sustainability and business recovery in the new normal” is scheduled to follow this.
Recording
The recording of the 28 May webinar is now available here using the password 1J+l=c$8