Open any newspaper and you’ll find stories of economic chaos: supply- and demand shocks, trade wars, shortages, and the rise of economic nationalism. You’ll read of supply chains in disarray causing the halting of manufacturing.
Supply chain practices popular just a few years ago are now being questioned. As the Harvard Business Review put it, manufacturers are under pressure to "rethink their use of lean manufacturing strategies that involve minimizing the amount of inventory held in their global supply chains."
But during this global chaos, Ensto has been able to maintain its lead times and has been able to offer products competitors cannot. Some product areas have experienced double-digit growth, and overall growth is up, as well.
Market Chaos
Ensto has not been immune to world crises. “Shipping a container of components from Asia to Europe used to cost 2,000 euros,” says Tomasz Bilinski, Ensto’s Head of Procurement and Customer Care. “But now it’s 15,000 euros. We got creative and moved components via rail across Russia, but then the war began and that was shut down. Sometimes you meet one challenge, and you’re immediately knocked down by the next!”
In addition to higher shipping prices, lead times for containers have doubled. "It used to take a day to offload a container, but now it takes weeks," says Bilinski. "And the electronics crisis has meant some components for our network automation products are unavailable. Suppliers have become unpredictable and some have closed altogether."
Bilinski and his team of 12 located in France, Finland, Estonia, and India, are responsible for making sure Ensto Group’s 80-million euro annual spend is used with the right suppliers in the right places. They find, select, qualify, manage, negotiate the contracts, and do quality control. This team is a large part of the reason Ensto has weathered the supply storm.
Building Buffers
According to Bilinski, there are two reasons Ensto has met challenges that some competitors have not. "First, in March 2020, when the world went into lockdown, we decided to order over a long horizon. We placed more orders when the world stopped, believing this would put us in a great position when the world restarted.”
“Build buffers was of course a risk, because no one knew know how long Covid would last. But we knew world had to reopen and we wanted to be first when it did. The Ensto product lifecycle is long so the risk was somewhat smaller, yet it’s still a cashflow issue. We knew the numbers, and the decision was made with top management.”
This calculated risk paid off. Ensto was one of the first to get components when the world reopened. “Building buffers in uncertain times enabled us to produce when others could not,” says Bilinski.
One thing Ensto has been unable to avoid is rising prices. Product prices are directly linked to component prices, which are linked to commodity prices, which have doubled and tripled for metals. “What’s important is that we have the products,” says Bilinski. “In the last two years we’ve morphed into managing availability, and we’re under less pressure to optimize costs.”
Transparency and Honesty
The second reason for Ensto’s success has been the way Bilinski’s team has elected to deal with suppliers.
“I believe a lot in communication,” he says. “We’ve chosen to share information with suppliers that a lot of manufacturers don’t.” Ensto provides suppliers with its monthly forecasts up to a year-and-a-half out. It also shares stock information, as well as suppliers’ delivery performance. “If a supplier knows what’s in your warehouse, what you plan to produce, and what bigger projects we might win, then they can work with you.”
“This transparency means that Ensto’s sales team has the best possible visibility into how fast we can get components, and suppliers see when we’re up for a tender, and they know they need to give us good time and good price.”
Transparency was a factor in Ensto winning a 10-million euro network automation tender in Algeria last year. "We did a really good job on that one sourcing electronics and metals," says Bilinski. Ensto has also had notable wins in Malaysia and Italy.
Goodwill
If there’s a third reason for Ensto’s success, Bilinski says it’s how his team has been treated. “There’s been a lot of goodwill toward my team, because people knew we were under pressure. It was a cooperative environment. We weren’t thrown under the bus.”
“And we did our best to extend that goodwill to suppliers by working with them. And it turns out that more materials are flowing and we’ve sold more since Covid.”
