Insight

2020 was a challenging year for a lot of companies within the fastener sector, with unpredictable fluctuations within supply and demand. However, through its Covid-19 strategy, Bufab Group was not only able to handle these challenges, but succeed in achieving its best ever net profit for a single quarter in Q3 2020.

Jörgen Rosengren, president and CEO at Bufab Group, explains: “2020 was undoubtedly a turbulent year, as I am sure everybody experienced. It was very humbling and disturbing to see what happened with the Covid-19 pandemic as it spread around the globe. Whilst this made it a very challenging year, we were still able to do well as a business thanks to the strategy we introduced to handle the Covid-19 situation.”

Bufab’s Covid-19 strategy involved three different stages – Protect, Restart and Invest. “Right at the start of this year, we saw the pandemic hit our operations in Asia. Whilst that was a challenge, it was also a blessing – as it enabled us to react quickly to the pandemic and introduce the necessary measures in order to protect our employees’ health, not only in Asia but also across western Europe and North America,” explains Jörgen. “We called this first phase ‘Protect’ and it had three objectives – to protect the staff and their health; our partners and their health; as well as to protect the customers. This meant that when the pandemic continued to travel around the world, we already had measures that we were able to roll out and implement in all our subsidiaries and sister companies. This helped guarantee we could keep our employees safe, whilst continuing to supply products to our customers.”

Keeping its customers supplied throughout the pandemic was of critical importance for Bufab. “Even early on we could see there were going to be disruptions in all supply chains, including our own,” mentions Jörgen. “We therefore worked with our suppliers to ensure they were keeping safe whilst delivering to us and this helped us to continue being a reliably supplier to our customers, which is vital if you are a C-part supplier.”

Jörgen continues: “As a C-Part supplier we help customers consolidate hundreds, if not thousands, sometimes tens of thousands of parts. Alongside this we offer very short lead times and local warehousing near their factories. Thanks to this set-up, any problems we had with our supply chains at the beginning were relatively small compared to the one’s our customer’s had with some of their A-part and B-part suppliers – where there are often extremely tight supply chains, which are very global.”

“A key aspect of being a C-parts supplier is also the ability to find ways to accelerate orders when they need to be accelerated and slow down orders when they need to be slowed down. This is a fairly common practice, but this year it was just a lot more intense than it is usually, but we were able to meet the challenge.”

By July, Bufab was in a position to say its ‘Protect’ strategy had worked. The Group had experience relatively few cases of infection at work and it had been able to supply customers throughout. “We decided to move onto the next phase of our strategy, which we called ‘Restart’,” points out Jörgen. “The aim of this phase was to ensure we started profitable growth again – by reaching out to our customers, both virtually and physically, to find ways to help them even further. This was a big success for us as we managed to achieve our best ever net profit for a single quarter in Q3 2020, which was quite a turnaround from the unprecedent sales drop of -25% we had experienced in Q2 2020.”

The success of its organic growth in Q3 2020 gave Bufab Group the confidence to look at introducing the third phase of its strategy – ‘Invest’, which it launched at the start of 2021. “Whilst we had kept investing and developing in 2020, our focus had been on the ‘Protect’ and ‘Restart’ phases as these were in-line with our Leadership Strategy of focusing on the customer,” mentions Jörgen. “However, with the success of the ‘Protect’ and ‘Restart’ phases we are a lot more confident in moving ahead with the ‘Invest’ phase and developing our Leadership Strategy in 2021.”

A key factor that forms the foundations of the Leadership Strategy is Bufab’s belief that more and more customers will start consolidating the management of C-parts in the future. “We didn’t just introduce the Leadership Strategy because it sounded good. We believe customers are going to want to consolidate their C-parts supply to only a handful of suppliers. That can often be a painful process that requires a lot of work on their side and the suppliers’ side. Customers are going to want to do that exactly once in their life and they are therefore going to be very selective with which company they choose as a partner,” states Jörgen. “By working with a C-parts supplier, the customer knows somebody is watching out for their product supply, which can sometimes be very convoluted and have numerous parts. It also means they have predictability in supply and can help shorten lead times. We can hold stock closer to their factories and manage it for them to fit their production.”

Jörgen adds: “There was already a move for tighter integration, which has been happening for many years, and it will only have been accelerated during the crisis. There is a difference between ‘Just in Time’ from a different continent by shipping container and ‘Just in Time’ from a warehouse 20km by lorry. If the market is normal and everything is working as it should, then they are equally risky. However, if that is not the case – which is what has happened in 2020 – then that is when the risk factors change and this is what customers are starting to discover.”

“Companies are already looking at what part of their supply chains have worked over the last 12 months and which part didn’t work. They will then look to strengthen those parts that worked and give them more to do and they will look to reduce the number of parts that didn’t work. The pandemic has enabled us to go to our customers and question why they need a warehouse for the products we can supply. Why don’t they just have them fed directly to the line in a Kanban or a VMI set-up and have it managed by a supply chain partner such as ourselves.”

Another big challenge for C-Parts suppliers is ensuring they can provide the productivity improvements customers are looking to introduce every year. “Customers generally look to internally produce 3% – 5% productivity improvement each year. This means that when you take over a significant portion of their operations regarding C-parts, you also need to become productive and provide that same level of productivity for them,” explains Jörgen. “This type of productivity doesn’t come from the part itself; it comes from doing things in a smarter and more seamless way. For instance, in the past years we have focused a lot on integrating digitally with both our customers and with our suppliers – in the day-to-day and in the supply chain, such as orders, forecasts, etc.”

Jörgen continues: “We are working on this as we see it as major contributor to achieving increased productivity. There is a lot of room for error and inefficiency when it comes to things such as administrative tasks. So if you can get these areas entirely seamless or get on the path to achieving it then that can be a major productivity gain. To add to this, you have topics such as forecasting and so on, which customers also struggle with – which has been especially clear this year where there has been such on, off, on again in demand. In those situations, the customers are spending a lot of time on forecasting and we are looking to help them do it in a much more efficient way.”

“At Bufab we have around 1,300 employees and they work roughly 2,000 hours a year. That is 2.6 million hours in total and if we can just improve our productivity by 5% – 10% then that is a huge saving to be made. This type of thing is also very difficult for competitors to copy, so it makes us a stronger partner for our customers – because we are able to do the same thing more efficiently than our competitors. All of these types of innovations are a huge opportunity for us, and the industry, with the exciting thing being that we are only just scratching the service.”

After such a testing year, what does Jörgen and Bufab hope for 2021? “I actually feel a lot more optimistic now than I did at this time a year ago, which may seem counterintuitive – as you would imagine this pandemic would make us less optimistic. However, a year ago we thought the industry was heading for a slump, but it actually got a lot worse than we could have ever imagined. Even though this happened, we, and our customers, have been able to handle it even better than any of us could have planned. It is only when you are in the storm that you know if things are lashed down and secure. We have surprised ourselves in a positive way in how resilient the company has been and how strong our customer and supplier relations have been. How we have tackled this crisis internally has also given us confidence and energy, which I think will help us accelerate our Leadership Strategy going forward. There is definitely a lot of pent up energy in our company, and maybe the whole industry. Hopefully we can all dust ourselves off, stand up and get back to work.”