The prices of raw materials have increased tremendously, whether it be steel, copper or concrete. Dutch media outlet SpoorPro recently reported about this. Different suppliers from the rail infrastructure industry discussed the impact for their company and expressed their concerns for the future. This includes us, as we, too, notice the consequences, and see the solution in a good functioning supply chain management. Our Chief Development Officer, Wouter Lampe, discussed our views in an interview with SpoorPro.
As part of an international company that supports developers and contractors with the construction and maintenance of the rail infrastructure, we also have to deal with a cost increase of energy and raw materials. To give you an idea: the rails index increased with approximately 30 per cent in one year. We offer railway related products and services as well as take care of the technical and logistics streams behind it. We believe that we can temper and safeguard the price increase by securing long-term contracts within the supply chain.
Our Chief Development Officer, Wouter Lampe, revealed to SpoorPro how we deal with the current market situation.
“Many contractors believe: ‘Everything I order is available.’ They don’t realize that there is an entire system of supply chain management behind it. Because we organize and fully equip the entire chain from start to finish, we already have the insights of which products or services under certain conditions our customers in need. In order to temper the price increase, we purchase our raw materials in advance to make sure that there are no unexpected surprises for our customers.”
In the Netherlands, there isn’t an actual free market for railway materials since there is only one actual buyer: ProRail. The urban traffic operators aren’t as big in volume and more so, they use products with very different specifications.
Many products are therefore only produced for ProRail. The Dutch railway contractor demands that a specific type of steel is used that isn’t very common internationally. This also applies to the specifications for turnouts, sleepers, and railway safety parts. The result is that a large part of the Dutch producers and suppliers have no other market opportunities for their products.
Another challenge is that the Dutch market, with specifications only applicable to the Dutch market, is quite small.
“Looking at Germany is a completely different story. Different types of products are used, which rigidly separates the markets.”
Despite efforts with TSI’s (Technical Specifications for Interoperability) to standardize international specifications, this has yet to succeed.
We and with us other suppliers are facing some serious challenges in the future.
“The railway industry is an industry with large volumes of material flows, but also in smaller volumes. There are modern but also very traditional products that have to be available at the right moment in the right place for our customers.”
If, for example, the life expectancy of a product is forty years, an unexpected need for this product can occur due to a sudden high demand.
“That is when you must have the right products in stock at the right time in order to be able to meet the demand. That is why we have a large assortment of products in stock on our premises in Crailoo, the Netherlands. In addition, we also have our very own Rail Services where rails can be welded, milled, and coated, depending on the question.”
There are also challenges on the demand side, since the demand of many of our products fluctuates tremendously. During such a period where a lot of renewal takes place, the demand is high, but with a sharp decline afterwards. Such a period is in the Winter.
The planning changes on a regular basis. Throughout the years, but also more recently, large fluctuations often take place. In addition, many customers also apply different work methods. A possible surplus of production and transport resources is in times of limited demand not deployable for other markets, due to a specific characteristic.
The fact that the prices of raw materials increase is closely linked to shortage: raw materials are running out, sources depleted. Recycling is one of the possible solutions. We try, also taking the future in great consideration, to reuse a large part of our raw materials as well as produce them in a sustainable way.
“From different aspects of the sustainability chain, we aim to fulfill our part in the cyclical developments in the economy.”