Opinion Piece

Fixing supply chains: The next big challenge for renewables

Between financial crises, the 2020 pandemic and now conflict in Europe, it feels prudent to brace ourselves and remain braced for future disruption to the global economy. Nowhere is this disruption felt more keenly than throughout our supply chains.

In renewables, across the globe we’re seeing an industry struggling to meet rising demand. Consumer, businesses and policymakers are all pushing for green energy and mounting energy prices are helping to drive people in that direction even faster.

Here in Southeast Asia, our situation is a little different to what our colleagues in Europe and the Americas are seeing. We’re less dependent on Russian oil and gas, while our proximity to China means shipping hardware is less of a headache. That being said, even we’re not totally sheltered from supply chain disruption.

Ongoing COVID-19 issues, along with port and factory closures in China are threatening a perfect storm where supply simply can’t be logistically matched to demand. It’s time to take a fresh look at how we connect eager consumers to the tools they need to realize their sustainability ambitions.

How is the renewables sector adjusting?

As a sector we need to be brutally honest with ourselves about the world we now inhabit. Cheap, fast easy access to quality materials and tools from anywhere on Earth; those are no longer the cards we’re holding. Expecting the unexpected must characterize the coming decades, because the surprises are unlikely to stop popping up.

What does that look like in practice? Well, we’re seeing a lot of big industry players wising up to the value of more in-depth risk planning. Looking at what exactly is happening at every stage in the supply chain and what realistic scenarios can we account for?

This kind of forward thinking should go some way towards mitigating supply chain issues, but you can’t plan for something like COVID-19 that comes completely out of the blue.

Sooner or later, the next big disruption is going to slip through the net. As an industry we need to diversify supply chains, spreading our available resources more widely so that these global issues make less immediate impact.

What are BayWa r.e. doing to effect change?

Our own operations at BayWa r.e. are changing in line with this new way of meeting demand. We’re increasing our regional presence, increasing warehousing across Vietnam, Malaysia, Thailand and the Philippines.

Those warehouses are also being kept closer to capacity, with less emphasis on just-in-time stock control. That’s particularly important for us because many distributors don’t actually carry their own stock and we need to be able to support them. Even small supply disruptions can leave installers high and dry for extended periods of time. We avoid that.

Improving supply chain diversity, to us, doesn’t only apply geographically. We’re also opening up relationships with more global suppliers rather than relying on a handful of partners at any given time. That takes a lot of focus for an organization of our size, because we can’t afford to compromise on the quality of those relationships. We have to offer the same long-term stability we ask from our partners.

Nevertheless, that extra effort must be made. The result is a more decentralized, dispersed global network of expertise that should prove more resilient against whatever life throws at us next. We can do this because of our size, which is strange in a way.

Large, global organizations like BayWa r.e. should be the most vulnerable to supply chains going haywire. This stands to reason; we work in more places and move more products across more borders. However, that size and reach have proved to be our biggest advantages in planning for future disruptions.

We generate enough first-party data to analyze and predict shortcomings proactively. In many cases, we can spot issues and work with supply partners to solve them ahead of time. Even in a worst-case scenario, we have hundred millions of dollars’ worth of stock stored around the world. We can redistribute that effectively to balance serious shortages.

Stronger supply chains enabling global transformation

Above all else, we’re keeping our ears open and learning from how other organizations of all sizes are adjusting to new realities. For everyone, Ukraine has brought sharp focus to the need for energy independence. Renewables are the key.

We’re not only in the business of fighting climate change now. There’s a new, geopolitical element to our sector. Policymakers have caught up with the need for self-sufficiency, or at least reducing dependence on a handful of major nations. We need to have the right answers to help governments make the right calls.

Everyone involved in this energy transition has a vested interest in supply chains being robust enough to deliver. We can’t afford to let disruption distract from the vital work of building a more sustainable world. The devil, after all, is in the details.

 

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