Fewer resources. How does Van Hessen cope with that?
What is going on?
“There are several issues at play,” says Harald. “In Europe, we expect to process fewer bowel packages in the short term. This is caused by the current social discussion around nitrogen, CO2 and animal welfare. The rise of vegetarian and vegan products also plays a part.” In Germany, for example, the pig livestock is expected to decrease by almost 50%. “We already saw this coming and had included it in Van Hessen’s strategic plan, but the speed at which this is happening surprises us.”
The European trend must be seen in a broader context. The lockdown during the corona pandemic disrupted the international supply chain. Corona also sparked a new awareness around the spread of animal diseases and brought a new vision on the meat sector. The corona crisis was quickly followed by the war in Ukraine, which brought about an energy crisis. Countries have become more risk-averse. New regulations and veterinary restrictions make our supply chain more complex and cause delays.
“This affects our customers,” Rob explains, “because scarcity leads to higher prices. We are having conversations with our customers about this. We have to factor the consequences into the price. The Supply & Demand department has to work harder, while the logistics chain has become longer. Prices are also being driven by inflation, which leaves us with a structural price increase.” Rowan also sees implications for how companies operate. “If you look at the past, you see that when raw materials are in short supply, companies adapt through mergers so that a larger scale can be achieved.”
Scarcity leads to higher prices and they are additionally driven by inflation. We are having conversations with our customers about this issue.
Van Hessen, like many companies in the meat industry, faces a scarcity of personnel. Using migrant labor worked for a while, but that model is now reaching its limit as well. “First, we looked for people from Poland to staff our gutrooms, then Romanians and Bulgarians,” says Leendert. “Already people from the Philippines, for example, are coming to work in the slaughterhouses in England. What options do we have after that?” A problem, especially, “because the slaughterhouse needs people first and only then will people become available for the gutroom,” Paul explains. “The gut room, i.e. Van Hessen, is the first to face a shortage of people. In some places, intestines are already wasted. What a loss!”
“Anyway,” says Harald, “we have a disassembly process in which the bowel package is taken apart, and we sell processed products. Without raw materials or enough people to harvest them, we cannot serve our customers. We saw the scarcity coming in 2017, but as of 2020, there is a sudden acceleration.” Thanks to prudence and foresight, Van Hessen has strategically focused on four areas of interest: new as well as existing markets, valorization, a local-for-local strategy, and innovation. Van Hessen aims at being the best.
Harald van Boxtel
The supply chain has become more complex. Obstacles can cause delays. Because of allocation, you want to be close to the customer. From a just-in-time economy we are increasingly moving toward a buffer economy.
New and existing markets
To cope with the scarcity of raw materials, Harald says we need a bigger source than Europe alone. “Certainly, Van Hessen is already involved in North America on a wider scale, but we need to go international even more. This applies not only to casings, but just as much to mucosa and the other products of the bowel package.” During the conversation, it becomes clear that Van Hessen has since long focused on this issue. “The beauty of our company is that you can move around with ease. You just go to where the pigs are,” says Leendert. Together, they name Chile, Paraguay, Argentina, Mexico, Norway and Romania. Besides expanding into new areas, Van Hessen also wants a further penetration of Van Hessen’s markets, especially in Europe. The UK, Germany and Spain are mentioned. Van Hessen faces the substantial challenge of increasing market share in a shrinking industry. According to Rob, “The scarcity in the home market also forces us to choose partners that are our anchor to the future. We remain loyal to our current customers, of course, but we make choices to ensure that we are among the winners in the industry.”
“But we have other options,” says Rob. “We can also add value to our products. Van Hessen wants to realize an even better valorization of existing and future raw materials. Since introducing the new knife, we are already getting significantly more yield from our casings. Our Gutroom Competence Center oversees the worldwide implementation of and compliance with best practices.”
Local for local
Besides valorization, i.e. more yield, Harald also considers it important that “we are closer to the end customer for the raw materials we harvest. Van Hessen already has a sound position and we must continue to focus on that.” That way, not only is there more profitability, but Van Hessen also has to incur fewer costs to get the final product to the customer. Rowan rightly notes that in this way, we are moving from a centralized to a decentralized model. According to Rob, this local-for-local approach also helps build a buffer in the supply chain. In the past, we shipped harvested casings to China to be sorted there, after which they went to the country of destination.
Paul van Lankveld
By selecting at more than one location, we are not only closer to the customer. We can also respond more quickly to veterinary restrictions, capacity issues, and logistic challenges.
“Because China is changing and implementing new regulations, this way of working now carries a risk,” Harald says. “Becoming independent is difficult,” says Paul. “In China, we have a well-oiled machine. The other locations still need a lot of attention from management.” Yet, the transition to decentralized selection is in full swing. Van Hessen now selects in Brazil, Paraguay, Egypt and Morocco. There are two additional aspects. Leendert mentions sustainability: “With the hourglass model, a product has to be shipped around the world twice.” “The supply chain has also become more complex,” says Harald, “and for the sake of allocation, you want to be closer to the customer. From a just-in-time economy, we are increasingly moving to a buffer economy.” “In this case, we need to transform the scarcity of selection facilities outside China into multiple locations closer to the customer,” Paul concludes.
“Because the availability of labor is a global problem, we are looking at automation and robotization. Labor is becoming scarcer and also more and more expensive,” says Leendert. “We saw this coming five years ago. Through robotization and automation, we can increase individual productivity and at the same time achieve greater returns.” “The need is here now,” says Harald, “In the USA, they are already not harvesting the raw materials in some places.” Van Hessen also wants more of its own factories and work with partners to make the process even more efficient. “Here lies an opportunity for us,” according to Rob.” But technological innovation is only one side of the solution. Van Hessen also continues to invest in its people. A new generation of managers is needed. “The average age in this room shows how important that is,” Leendert notes dryly. “That’s why we need succession planning besides career planning,” Rob adds. “True,” responds Leendert, “recruitment remains important, notably of people with the right knowledge and skills. Through our network, we are very successful in reaching our target audience. Quality staff also know how to find their way to Van Hessen.”
We are focusing on automation and robotization because labor is becoming scarce and more expensive. At the same time, we cherish the people we have by taking good care of them and we also continue our recruitment efforts.
Working together with the winners
It appears Van Hessen is well prepared for the challenges of the future. By always being alert to changes in market and society and responding to them in a timely manner, Van Hessen is in an excellent position to deal with the scarcity of raw materials and people. New markets are targeted, existing ones are made more profitable and become increasingly local-for-local. Maximum valorization has always been the driving force behind Van Hessen, and by paying attention to people and applying innovations, we can do this ever better. Despite a complicated supply chain and the abundance of new challenges. “We want to serve the winners in the industry,” says Rob. “In addition, we also want to be there for those parties who fulfill a niche market and therefore remain important,” Harald adds. “And remember: we do this on both the supply and the demand side. Our job as senior management is to look ahead and be aware of what is going on.” Van Hessen was used to growth and is now adjusting to a new situation. But the right steps toward decentralization, innovation and further valorization have already been made.
With our local for local strategy, we are moving toward a decentralized model in which we try, insofar this is possible, to harvest and process products in the same country. Through fusions, we can scale up at a local level.