Syngenta interview: If there’s going to be a crisis, decide to manage it early

Sanjiv Rana (SR) talks with Syngenta's head global supply & HSEQ, Mike Hollands, to discuss the company's response to the global supply chain disruptions caused by the Covid-19 pandemic.

Sanjiv Rana (SR): What is the level of forward and backward integration in Syngenta's manufacturing?

Mike Hollands (MH): In crop protection chemicals, about 50% of our manufacturing is in house and the rest is through external vendors. Of course, it changes by active ingredient and by country, but that's sort of the general number.

SR: What is the geographic spread of your manufacturing facilities?

MH: If we look at active ingredients, there are over 30 ais manufactured at seven facilities globally. The biggest of them is in Switzerland. So, we have a couple of factories in Switzerland, two in the UK, and one each in the US and China. But if you look at the formulation, fill and pack side, we have around 25 internal sites and those are spread out globally across Asia, Europe and the Americas.

SR: China was the first to go into lockdown. How did you deal with that before the subsequent spiralling in the rest of the world?

MH: The first impact was the government locking down the Wuhan area and that was a big logistical challenge. The lockdown shut down all our manufacturing for three or four weeks and we couldn't ship anything. We didn't have any assets actually in Wuhan itself but we were caught up in what were the closures outside of Wuhan. And then, of course, they shut a lot of the ports and transport on the roads. So, just moving things around was very tricky.

SR: How long did that last?

MH: I think we were in a solid lockdown for only about three weeks and we then began to be able to move things around. We ended up being quite innovative. For instance, it was hard to move things on the road, so we moved things by barge. We moved to river transport instead just to try and get around some of this stuff. It was pretty neat that we could start to get things moving really quickly.

SR: How were things affected as the lockdown moved to other geographies?

MH: The next hot spot after China was Italy and then France and Spain. So, we briefly shut down a seed plant in Italy. Then as other governments started to restrict things, we had quite a bit of trouble with people movement and some goods movement in Europe, especially France. But we never actually closed down anything for any significant period of time - we managed to keep everything going.

SR: Was the disruption more in terms of shutdown of manufacturing facilities or in terms of logistics and transport?

MH: Well, our risk profile sort of moved backwards and forwards. In China, it ended up being mostly about logistics. When it moved to Europe, we initially thought it would be about manufacture because our Swiss manufacturing site is quite close to Italy. So, we were very worried about getting contagion on our sites in Europe. But once we settled those down and made sure that the sites were safe, it moved back to being about logistics again. Then it was all about what we could do to get things across borders because governments were doing things quite quickly and we had to move quite fast.

After Europe, it moved to India. India shut itself down and that was about both manufacturing and logistics. And then it was about trying to get things in and out of ports and re-opening all of our manufacturing assets. Once we got that sorted out, it moved to Latin America. Latin America at the moment is still very much a developing situation and we have concerns about preventing people on our manufacturing site from becoming infected. So, it's all about protecting manufacturing sites. As you can see, it has sort of been a moving target all the way through.

SR: How long would a lockdown need to last before supplies really started getting disrupted?

MH: It's a seasonal business. So, in February in Europe, for instance, products are just starting to load into the channel and we are starting to move things out to distribute to hit the springtime. If we had an interruption in key European markets of more than two to three weeks, we would feel an impact. It would not be across everything, of course, but things would start to become tricky in terms of product availability. I think if anything looks like it's going to shut for ten days, it could be risky for customers in the sense that we would not be able to get stuff to them.

SR: Was Syngenta prepared for such a disruption or was it more a case of learning as things progressed? What sort of planning is required to deal with something of such global proportions?

MH: I think we have a good long-term strategic view. Companies talk about supply chain visibility and try to get end to end visibility. We did a lot of investments in terms of platforms so that we know where all of our products are all of the time. We have got real time monitoring and that has allowed us to weather quite a lot of disruptions. Before Covid-19, the previous disruption would have been the environmental shutdowns in China. And before that, there was even a cyberattack on logistics providers a couple of years ago. So, there's always something going on and strategic investments are key.

It's also important to trust your teams locally because anybody who thinks that he can manage a response to a global pandemic from an office in Switzerland is kidding himself. So, you have got to empower teams and keep your key suppliers close to you. For instance, we have strategic collaborations with the shipping company, Maersk, on logistics. We are also very close to our Indian and Chinese suppliers, even to the point of helping them with their business continuity plans. We ensured that because we had an "essential industry" status, we were providing letters to packaging suppliers in India to ensure that they could operate when they were being told that they could be shut down. So, really looking at the whole ecosystem is essential because you are only as good as your weakest link.

SR: There has been talk of companies seeking to reduce dependence on China as the main manufacturing hub globally. Environmental pressures on Chinese manufacturers, the US/China tariff war and the recent impact of Covid-19 seemed to have raised questions.

MH: We have a long-term strategic approach and always try to look at whether we can have multiple sources to make sure that we have some flexibility and manage risk. Initially, there was thought of China being a tricky place to manufacture not least because of the environmental clampdown that was going on there. But now you have India becoming quite protectionist and there is a question about whether India is a good place for sourcing. India has recently talked of banning some products as well, so that becomes a bit trickier. And then you have geopolitical situation with the US starting to make noises about not wanting Chinese goods and India too saying the same. So, some of the global flows look a bit tricky. Multi-sourcing and good risk management up front is what will set the winners apart.

SR: Do you feel adequately prepared for another disruption of this nature?

MH: I think one of the key things that helped us was the fact that we reacted fast to the developing situation. So, maybe that's something to think about for the next phase because the quicker you can react to something, you sort of stay ahead of it. We were able to put in pre-production or stock builds or segregating workforces or even preventing visitors going to sites before it really got bad. Therefore, we always kind of slightly stayed ahead and that's probably why we were probably industry-leading in this. We were just faster off the mark. I would say that if there's going to be a crisis, decide to manage it early.

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This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.