12 May Rieusset’s positioning in the face of uncertainty

Author: Jordi López, General Manager of Rieusset

Ever since the state of alarm because of the pandemic was declared on March 14, 2020, uncertainty has been our constant traveling companion. It is not that it did not exist before –it is well known that we have long been living in an environment marked by VUCA (acronym that stands for volatility, uncertainty, complexity and ambiguity)– but perhaps not in such a noticeable way as it has been continuously due to this.

The COVID-19 pandemic with the subsequent closing down of all non-essential activities and the closing of borders that completely eliminated tourism, the invasion of the Ukraine in January of this year and the instability of energy prices or shortages of supplies or the costs and situation of transport mean that now, more than ever, managing the company has become immediate with little more strategy than the management of the immediacy of the short term.

How have we acted at Rieusset?

At Rieusset we have not been exempt from these difficulties, having had to deal with all these problems –just like every other company– with the involvement of most of the company’s departments: from Sales with its constant meetings with customers, to Purchasing with meetings and calls to suppliers, and even the technical and financial departments and Management itself.

But how did we tackle it? The first decision we made was that we would work with transparency.

With such high increases in all –and I emphasize all– raw materials, we decided first of all to keep our clients constantly informed so that they knew at all times what was happening, even though there were occasions when it seemed impossible to believe that what was happening was real: price increases in raw materials above two digits, lack of supply of materials either due to a shortage of some material or because our suppliers shut down their plants since, with the skyrocketing electricity or gas prices, it was more profitable not to produce. Complete madness.

The second thing we tried to do was stay ahead of things. Although we have always tried to anticipate what the client needs so as to have the material in stock when they send us the purchase orders, on this occasion we were more incisive, “urging” clients to anticipate their orders or “taking the risk” of buying larger batches of material to correct both the price increase that might ensue and to prevent any increase in the delivery time. This led us to carry out operations where we accumulated much more material than usual for the sake of good service to our clients.

The third thing we wish to highlight is what we did not do. We did not send letters to our clients expressing extreme positions which, when we receive them make us feel that more than informed, we are threatened. It was all handled through talks with our clients one by one, explaining what was happening and how this was affecting our agreements. But these were not communications meant to pass on the problem but rather to propose solutions so that customer service would be affected as little as possible. Win-win solutions where each party could contribute as much as possible in order to figure out how to avoid the problem. We can honestly say that we were met with a very good predisposition by all of our clients in order to handle these problems, and although there were some very tough negotiations which our sales team handled with rigor and flexibility until finding the solution, the result has been overwhelmingly positive.

There is also another thing we wish to mention that we did not do. At Rieusset we have “no change” agreements with all clients, which is to say, agreements that do not allow to modify the use of raw materials without prior homologation. And we did not. When we were faced with situations where we were not able to deliver to a client due to lack of material, we either proposed homologating an alternative material –which is an action that always requires time– or we negotiated extraordinary delivery times. This, on some occasion, caused a client to refer an order to the competition, but we think that this was a lesser evil compared to the fact that the client was left out of supply. Changing the material would have been, in addition to a breach of contract, a risk since the material might not work on the customer’s lines, which entails a loss for the client and a loss of confidence in Rieusset.

Lastly, we wish to highlight what the purchasing department has been doing since the beginning of this situation some months ago: daily negotiations with suppliers, monitoring of the agreements reached –compliance with delivery times and the request for solutions when these are not met again– and a constant search for alternatives. It has been, and in fact continues to be, a colossal task to ensure that our customers are not left without supplies at any time.

And what will we do in the future?

Obviously, it does not look like this situation is going to change any time soon, but rather that it may turn into something more habitual. What will we do then? At Rieusset we have come up with several lines of work that allow to resolve this situation. Among these measures and in no particular order we would like to highlight:

• Identifying suppliers whose energy costs do not have such a large impact on the product. We would like to point out that we have already found a few supplier companies that produce their own energy, wherefore the high gas and electricity prices do not affect the price of their product as much.
• Reducing the validity period of prices with our customers. Until now we had price review periods that easily reached a year. Given the current volatility, it is impossible to maintain a price for so long, wherefore we try to close agreements with customers with more frequent revisions, even giving prices for each order.
• Price revisions are often linked to market indices such as PLATTS or ICIS LOR, which have now been identified as useless as they do not reflect all production costs. It’s not that we did not know this before, but the stability of the market was not involved. Now we are looking for other mechanisms that are more complete but more open to being able to explain the reason for price variations.

In short, these are the measures that, without being perfect, we have taken at Rieusset to face these uncertain times and which we share with you in case they may also help you in your day-to-day work. We will be delighted to know the measures that you have adopted to work in these conditions. Write to us!