MEWG Webtalk #2: Valuable Insights into Supply Chain Issues

"Sharing is the best way to support each other during this difficult time," stressed Gaetano Cantalupo, CICC Vice President (Shanghai) & General Manager of Comau (Shanghai) Engineering Co., Ltd.

On May 19th, the China-Italy Chamber of Commerce (CICC) together with its Mechanical Engineering Working Group (MEWG) organized the second webtalk of the webinar series called "Sharing Is Caring: Issues for the MEWG in China", aimed at providing useful tools to overcome the current market difficulties due to the recent COVID restrictions.

More than 70 online participants gained some valuable insights into how four companies, located in different territories, are reacting to supply chain issues: Piaggio China in Foshan, Carraro China in Qingdao, Caprari China in Shanghai, Piovan Plastic Machinery in Suzhou.

"Actually, we are located in Suzhou SIP and luckily till now we've never been in lock-down," said Flavio Zaghini, General Manager at Piovan Plastic Machinery, considering himself one of the lucky ones of the moment. Obviously, like many other companies, Piovan faced difficulties in following the requirements of the local government:

"At first, I have to say our business is mainly focused on centralized systems which of course are greatly customized. Our engineering job is the core of our projects and seldom we can sell standalone standard machines. So, we arranged home working for our employees, especially for Technical Department with direct access from home to our server. We arranged our logistics accordingly to local government requirements, driver to guide trucks to our company, separated toilettes, dedicated areas for trucks coming from Suzhou or outside Suzhou, etc. A third party is coming every two days doing nucleic tests to all our people and in this way our workers have been coming to work without problems."

—Flavio Zaghini, General Manager at Piovan Plastic Machinery

Piovan has not changed its supply chain strategy. "Luckily our equipment has high technological contents, so we are not fighting for the minimum price. We are not looking for global purchasing strategy," underlined Mr Zaghini.

Piovan has several independent local production sites with local supply chain to serve the local market. The strategy that Piovan has been implementing for many years, which consists in choosing "zero kilometer" suppliers, has proved to be a winning one for the company. Although the impact on the business is not significant at the moment, it is also true, Flavio admits, that it will be difficult to attract foreign talents and keep them.

Quite different is the testimony of a company with a factory based in Shanghai, such as Caprari, from which the whole of China is normally served.

"Until this week, our Industrial Park was not ready to work in closed loop. Just today they informed us that this possibility can be taken into consideration, and we are evaluating how to reorganize. Until now, commercial and finance people worked from home, while factory was completely closed," said Massimiliano Maria Palaia, Country Manager at Caprari China.

Caprari imports some pumps directly from Italy and then delivers them to customers without any local transformation; other pumps, on the other hand, are assembled or manufactured locally.

For this reason, supply chain disruption is having a very strong impact on their business. In fact, if it was possible for them to deliver goods from Italy, everything in the Shanghai warehouse is blocked.

Unfortunately, the disruption of the supply chain does not only concern Shanghai, but also many other areas of China currently in lockdown. Equally difficult is exporting to Southeast Asia, with various problems not only in organizing the shipment, but also in delivering the original documentation necessary for export.

The biggest concern is uncertainty in the future: many projects in different areas have been stopped / postponed because of lack of funds, closures because of Covid cases, or lack of trust in the future business view. 

"Companies have to think both globally and locally. The time to have one policy and to be dependent from one country for the supply chain, ended two years ago and now it just become crystal clear."

—Massimiliano Maria Palaia, Country Manager at Caprari China

Finally, the visions of the other two companies that took part in the roundtable are quite positive: Piaggio and Carraro, located respectively in Foshan and Qingdao.

Their supply chain has not been disrupted and fortunately there has not been a strong impact on business operations now. Piaggio, for example, has already decided some time ago to move production plants to other ASEAN Countries, while continuing to grow its presence in China by increasing the staff. Carraro, despite having had to face delays in the supply chain caused by the congestion of the port of Shanghai, is able to take advantage of the proximity of the port of Qingdao.

The webtalk moderator Antonio Tagliati, Vice Coordinator of the MEWG and Sales and Marketing Manager at ISB Industries, pointed out in his closing remarks that some mother companies are considering moving some parts of the supply chain to other countries. However, looking at the future, the scenario is still quite positive.

The CICC thanks all the participants and looks forward to seeing you at the next session of the webtalk on Thursday, May 26th, which will discuss incentives to support the recovery after the lockdown.