Every month, OVRSEA meets with its shipper customers to discuss the latest freight and logistics news and current and future challenges. This week, we had the opportunity to talk with Philippe Pessina, Global Supply Chain Manager of Seqens EDS, and experienced shipper in the pharmaceutical industry. He gives us his view on the deep logistics crisis we are going through and the lessons he draws after more than a year and a half of storm.
Hello Philippe, could you introduce yourself?
Since 2012, I am Global Supply Chain Manager in the EDS (Essential Drug Substances) business unit of Seqens (ex-Novacap), a French group with more than 3000 employees. After scientific and management studies and a beginning of my career as a salesman, I have been working in the supply chain for 20 years now.
What does Seqens EDS produce and what are its special features in terms of transport?
We produce leading active pharmaceutical ingredients, such as aspirin and paracetamol, but also salicylic acid and methyl salicylate. Our business is pharmaceutical synthesis, and even though we are now very close to our customers, the pharmaceutical companies, our products are still of modest value upstream of the drug value chain compared to what our customers make of them. The cost of transport is therefore an impact for us. Our customers are big names like Sanofi and L'Oréal, to name but a few. Our factories are located in France, Thailand and China and each of them exports all over the world. Transport has therefore always been a key issue for us.
The world we live in is very unpredictable, on August 25, I don't know what I will have to pay on September 25, so defining our price levels can get challenging.
What gets your attention the most in the news nowadays?
First of all, this terrible lack of visibility. The world we live in is very unpredictable, on August 25, I don't know what I will have to pay on September 25, so defining our price levels can get challenging. What we are experiencing is unique, I have never seen such a level of price and uncertainty in my 20 year career. The worst thing is that today, even with 40-foot boxes advertised at $22,000 USD between China and the US... we end up accepting it. However, the issue that concerns me even more is the collapse of transportation reliability. We have reached a stage where we can no longer tell our customers with certainty when their products will arrive, and this at a time of peak consumption of paracetamol in particular. Add to this other difficulties such as the structural shortage of truck drivers or the Covid constraints, and the cocktail is delirious. But hey, you learn and adapt as you go!
Precisely, how did you adapt to get through these 18 months of turbulence?
Our continuity plans have enabled us to adapt quickly and avoid what we feared most: the disruption of our customers' supplies. In detail, I can identify four priorities: maximum anticipation, diversification of transport partnerships, thorough benchmarking of the competition and reinforced communication.
Anticipating as much as possible has meant diversifying our partnerships. That's when we approached OVRSEA, which gave us another vision and other answers. As for communication, it is essential in times of crisis. I do a lot of conference calls with clients to explain the situation to them, providing maximum transparency and the little visibility I can give them. Providing the client with a coherent message is essential, especially when lead times are announced. Good internal communication is therefore also necessary.
On a deeper level, has the crisis called into question Seqens' logistics strategy?
Yes, this crisis is changing the face of our industrial thinking for the future. This is also why, in partnership with our customers, Seqens is considering investing in the construction of a paracetamol production plant in France. The impact is much deeper and longer lasting than the hassles we have to deal with on a daily basis. In recent months, we have also had to review our inventory strategy. When transport reliability is no longer assured, stocks often become essential to avoid supply disruptions. For example, we have decided to build up a buffer stock in France and North America.
Are you also open to other modes of transportation?
The current period requires us to think about alternatives. At Seqens, we believe in the railways, even if they currently represent barely 2% of our transport. It has almost only advantages, but has a major disadvantage today, namely the scarcity of availability (in addition to the cost). I believe that road transport can also be a credible alternative. In short, we are looking at all possibilities. Agility is vital.
How do you envision the weeks and months ahead?
With the approaching Golden Week the uncertainty around rates remains an unanswered question. But once again, it is the risk of disrupting flows for our clients that I fear the most. We have made a name for ourselves for virtuous reasons, so to stop supplying a client would have a disastrous effect in terms of image and trust. Avoiding customer disruption remains our number one priority. Despite this exceptional situation, we remain confident. We have already shown our resilience in difficult situations.
Before leaving... a little word about The Merchant?
Vital! Specialized newsletters such as The Merchant are fundamental resources for me. They allow me to explain the situation better to our teams and to our customers. They are even real decision-making tools, especially when we can switch a customer from one production site to another like aspirin.
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