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Interview: Dynamic steel price development
For the production of its components, Solvaro purchases steel in different grades and cuts from suppliers. The dynamic development of steel prices in recent years has also had an impact on purchasing behaviour. Ilona Bálványossy, Head of the Purchasing Taskforce, provides information about the developments and how the “Solvaro Purchase Taskforce” is tackling the challenges.
Considering the strong fluctuations in steel prices, how can you ensure that Solvaro can continue to offer a consistently high price-performance ratio to the end customer?
We continuously monitor the steel market and attach great importance to triggering orders at the optimal time and in the right quantity. The sales and SCM department gives us valuable support and provides us with a precise forecast of customer orders. This shows how many parts each customer orders or calls off and when. That information is crucial for the timing of material orders.
Solvaro procures steel and other metal products as standard coils, slit strips, sheets and other blanks, the product spectrum ranging from deep drawing steels such as DC01 – DC06 to various stainless steels and aluminium. With which product is the challenge currently the greatest?
The challenge is that there are very different market situations across all products. Each of the products mentioned has already been affected by price fluctuations and bottlenecks and may also be affected in the future. So it always depends on the market situation, which is sometimes hectic. For our work, it is essential to continuously observe the entire market and anticipate developments. This enables us to be prepared for different scenarios.
What other challenges besides price developments do you currently have to deal with in purchasing? Are there supply bottlenecks or delays due to disrupted supply chains?
Our purchasing strategy is based on long-term partnerships, especially with rolling mills. We also have close contact with service centres throughout Europe. We have built up our supplier base in a targeted way. This strategy is now paying off and helping us to manage disrupted supply chains with comparatively little disruption. Again, we need to be prepared for all threatening scenarios so that we always have an alternative to fall back on in an emergency.
What aspects are important to you when working with suppliers? How do you manage to realise long-term partnerships with high delivery reliability and at the same time maintain competitive cost management?
When working with suppliers, quality comes first. After all, we place the same quality requirements on the entire supply chain that we place on our own work. In concrete terms, this means: Ideally, the supplier is certified according to IATF, but ISO 9001 certification is a basic requirement.
In addition, the following aspects are particularly important to us in our cooperation:
- Innovative strength
- Close, trusting cooperation
- Delivery reliability
- An attractive price-performance ratio
- Long-term security and stability of the company
We measure and evaluate the aspects mentioned here on an ongoing basis. At the same time, we develop them further, refine them, coordinate them and learn from each other. These are the principles of our work.
Which guidelines and standards are important in dealing with the supply chain? What impact does IATF 16949 have on your work?
The QM standard DIN ISO 9001 is the foundation of our work. However, we also take into account other customer-specific guidelines and standards; these can vary depending on the product and industry. Sustainability rankings have also played an increasingly important role in recent years. The IATF as an automotive-specific update of ISO9001 is becoming more and more important for us and our partners as a whole. We are currently in the certification process and of course also pay attention to securing this standard in the supply chain.
In order to ensure consistently high quality standards throughout the entire supply chain, we naturally also attach great importance to responsible procurement in this context. Faultless deliveries are always our top priority, as this is the only way we can also guarantee the highest quality standards to our customers.
What role do sustainability aspects play in the supply chain and how do you deal with the ever-increasing legal requirements?
We ensure compliance with legal requirements within and outside the company through a whole range of measures. These are also confirmed by our sustainability rating according to SAQ, which records sustainable corporate action at the economic, social and ecological levels. A good example of concrete implementation measures is the use of reusable packaging and the reduction of packaging waste.
In this context, our suppliers are encouraged to take our Code of Conduct into account. In doing so, they commit themselves in particular to respecting human rights, but also to protecting the environment and climate.
It is fundamentally important for us to be able to react quickly to changes in the supply chain. We achieve this goal by maintaining a complete overview of our logistics process at all times. The main focus is on close cooperation with continuous information and data exchange. Our procurement and transport processes are completely digitalised and do not require any paper. This allows us to avoid information loss at interfaces, to coordinate logistical processes more easily and to have real-time access to all processes.
What aspects are important to you when entering into new partnerships with suppliers?
In addition to the aspects mentioned above, it is very important for us to create added value along the entire supply chain. Specifically, this means that we demand the same capabilities from our suppliers that are expected of us. This includes, in particular, the integration of uniform processes in the supply chain, a strategic planning approach as well as efficient and responsive logistics. In addition, mutual trust and a smooth flow of information are important to us when selecting suitable suppliers.
How do you react to geopolitical developments, for example sanctions against certain countries? Have you been affected by the consequences of such scenarios in the past?
In connection with the war in Ukraine, we did not feel any direct effects, as there were no direct purchases from Ukraine or Russia. Indirect effects, however, were clearly noticeable. For example, normal daily business suddenly collapsed in February 2022. On the important London Metal Exchange (LME), trading in nickel was stopped, so that we did not receive any price offers from stainless steel suppliers for days. This was a first in the history of the LME. The immediate consequence was that prices for raw materials and energy suddenly rose to record levels. At the same time, demand rose dramatically in parallel with the price increase. As a result, the shortage of materials made itself strongly felt.
In this situation, we had to react quickly and effectively to maintain our ability to deliver. One of the first actions was to rebalance current prices and future demand. In this context, we also reconsidered the stock levels of all materials. To remain able to deliver, we had to increase both internal and external storage capacities. In the meantime, the initial market panic has fortunately subsided, but we continue to struggle with the “energy surcharge practice”.
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