Turbulence in International Supply Chains and Logistics with Xavi Sanz of Across Logistics

Patrick:

Hello, this is Patrick Daly and welcome to Interlinks. Interlinks is a program about connections, international business, supply chain, and globalization. The effects these have had on our life, our work and our travel over recent times. Today on the show we’ll be talking to Xavi Sanz, branch manager of the Huangzhou China office of Across Logistics. Xavi is originally from Barcelona in Spain, and through his career has lived, studied, or worked in several countries including the US, Denmark, Singapore, and China. Likewise, Across Logistics, a Spanish logistics company providing services in air freight, sea freight, road freight, and rail freight, as well as customs brokerage, warehousing and distribution, is truly international. With offices or joint ventures in Europe and Asia and countries such as the Netherlands, China, Cambodia, India, Indonesia, Malaysia, South Korea, Taiwan, Thailand, and Vietnam.

Patrick:

So given the challenges that both manufacturing and distribution companies have been experiencing in Europe over the last year or so, with their inbound logistics, I’m looking forward very much to finding out from Xavi what the latest developments are in this area, and what businesses should be considering as they plan for 2022. So welcome Xavi, and thank you very for being here with us today.

Xavi Sanz:

Thank you, Patrick. The pleasure is mine.

Patrick:

You’re very welcome. So to kick off Xavi, could you tell me a little bit about your career to date? How did you go from studying economics at the University of Barcelona to running the branch office of an international logistics company in Huangzhou, China?

Xavi Sanz:

Yes, of course Patrick. Well, as you said, I did my economics degree in the University of Barcelona. Previously I had the chance to study my last year of high school in the US where I could learn my English when I was 17. Then, while doing my economics degree, I had the opportunity also to do an [Erasmus] in Berlin in Germany for one year to learn German. Then, also a six months in Switzerland in Fribourg on the French side of Switzerland. Well, after finishing my economics degree, I just landed, I don’t know how into the logistics field. Which I had completely no idea about it, right? So I landed in one of the leading logistics companies by the time 12, 13 years ago in Barcelona. Where I worked there for one year.

Xavi Sanz:

After that, I got some scholarship from the Spanish government [Effix]. I had the chance to study six months in Madrid, and work on the Spanish embassy in Denmark for one year. Then also moved to Singapore to work for one year, which was one of my dreams by the time to work and live in Asia. But this is back in… Yeah, more than 12 years ago. After that period, Patrick, in 2010, I had the pleasure to join Across Logistics. What I’m working right now. A company made by three people, only three people, by the time in 2010. Since then, the idea was to open the office already in China. That was my duty to come from Singapore to Spain to open later in China. But it wasn’t possible for the next six years, because we couldn’t find the right partner to open in China. It wasn’t until 2016 that we could open. Then 2017 I came to Huangzhou, the city between Shanghai and Ningbo, to open the branch by myself. Here I am fighting against everyone.

Patrick:

Excellent. Tell me then, a little bit about the business of Across Logistics. What are the main activities of the business in general, and there at the Huangzhou office in China? What kind of clients do you have?

Xavi Sanz:

Yes, Patrick, we are what it’s called the freight for water. We are a logistics company that what we do is, we ship cargo by sea and by air. When it goes by sea it’s by containers, usually. We do also breakbulk, and other type of movements, but by sea and then by air. It’s a very traditional old style business to transport things from point A to point B, there is no secret on that. Well our customers, mainly our customers, are small and medium companies. Small, medium companies. At the end of the day, I come… I’m Spanish, our headquarters are in Spain, and as you know very well. So Spain, and I would say 98 to 99% of the companies in Spain are small and medium enterprises.

Xavi Sanz:

Our company, our customers are also small companies. Although, during the last, I would say, the last two years, more and more bigger companies that are not finding the right solutions or the right alternatives into the logistics industry with our competitors. They knock on our doors and they come to us to find if there is an option. Nowadays I’m proud to say that we work with the small companies, but also with some big companies.

Patrick:

Where did the motivation or ambition come from, in Across, to go to Asia and actually have an office in China?

Xavi Sanz:

That’s a good one, Patrick. Actually, we started in Spain and most of our business comes from China. Most of our customers, they import from China. There was… China has been here for a while already, but it has been always very, very important. I would say that China… There is a busy road in Barcelona called Passeig de Gràcia. It’s a commercial street in Barcelona. Let’s say like a [Spanish]. Okay. Where it’s a very busy commercial street. If you put a store in Passeig de Gràcia you put a store or restaurant in [Spanish] I don’t know if you will make business or no. But, I can guarantee you that you will have a few low of potential customers going through your door.

Xavi Sanz:

So as a logistics company that we are, having an office in China, it brings a huge potential to increase your services. For us, it was not an option. It was mandatory that the logistics company like us, with a very international view, we had to open to China. We had to open to China to be present in China to know what’s going on in China from firsthand. To help our customers in Spain, and then from here also offer other services. Because while you open here in China, you can expand and extend your services, and not focus only on Spain.

Patrick:

I see. So then, as someone from Spain, what kind of cultural differences and similarities have you encountered while working in Asia? What have you had to do yourself in order to adapt to those differences?

Xavi Sanz:

Yes. I’m still on my process to adapting, Patrick. I’m still on my process to adapting. Okay. Since I arrived to this wonderful country and I think I will be adapting here for the rest of my life. China and Europe… Let’s say China and Spain, okay? But I would say China and Europe, or Asia. There are huge differences on terms of cultural, and I think that this is one of the key points why some foreign managers, like myself, comes from headquarters to overseas. One of the points of course, is to [inaudible] also to reduce this cultural impact. One of the examples always I say we receive an order, for example, we receive an order in Spain, “Please contact this supplier. He has some cargo, blah, blah.” So our team in Across China, immediately they would contact the supplier and check the status of the cargo and everything. Right? But for example, the supplier, it might take maybe one day or two days sometimes to reply. Or we might take one or two days to get the full information. Right?

Xavi Sanz:

From the Chinese point of view, if we don’t have information to give, they would not reply the customers in the overseas because, we have no information to give. So because we have no new information to give, we don’t reply. While our Spanish office, or our customers in Spain, due to the big time zone difference they wake up at seven o’clock, eight o’clock in the morning expecting some news from us. Like, “Well, let’s see if Across Logistics contact or not contact.” So, I’ve noticed that at the beginning, maybe we wouldn’t reply on time because there was no news, so we have been working towards this direction. Although there is no news, people likes to know that there is no news. That’s one of the big cultural gaps we had here.

Patrick:

Yeah. There’s lots of tricky differences that are sometimes difficult to process isn’t that right?

Xavi Sanz:

Yes.

Patrick:

In Europe then, over the last year or so, we’ve seen rates for 40 foot containers coming from China jumping from maybe a thousand, $2,000 to anything between, I don’t know, 14, $20,000. How did this situation come about? What do you think are the main contributing factors?

Xavi Sanz:

Yes. It’s right, Patrick. We saw in 2018, rates around 1,000 per container every thing started during the pandemia. I would say everything started in March, April, and May, 2020, I think or ’19, I don’t remember when all the outbreak. When all the people was at home and couldn’t go out, couldn’t travel. Couldn’t go to the restaurant. You know, couldn’t spend money on services. What people did with all my respects, a part of suffering, of course, because it has been hard for all of us. It’s sitting at home and spending money online. In Amazon and all those things. Many people also had to move office and to work at home. So, because they work at home, they buy a new chair, they buy a new table.

Xavi Sanz:

They buy a new laptop. They buy a new computer. Also, people spending more time at home, they see the bathroom, they see this toilet is not good. So they start to fix the house. All these small things that you didn’t do that you expect to do it on the summer. Right? And now you’re sitting there every day, you see this dirty wall, this hole in your wall. You want to fix it, right? So, during that period, Patrick, the demand increase a lot on the products. This demand was shifted to the production in Asia. Don’t forget also, Patrick, that during that time of pandemic, March, April, May, the shipping lines, who are making lots of money right now, I’m hoping to say that. They suffer a lot also.

Xavi Sanz:

They suffer a lot because the international trade dropped down dramatically. I mean, it was amazing. It went down and the shipping lines, they had to take out the vessels. They had to take out the vessel, just park it in the ports because there was too much vessels on that. When the businesses start to recover after a couple of months, let’s say June, July, August, some of the vessels they were out. So imagine that you are a shipping line, Patrick, you have some vessels and you are making money. You’re making money with the existing vessels that you have, and you have 20% of your fleet, or 30% of your fleet it just parked in the port. You see that the prices starts going up, and up, and up. Not because there is increase on demand.

Xavi Sanz:

There is a shortage of supply, right? You, Patrick, as a shipping line owner, you have no incentive at all. You have no incentive at all, Patrick, to bring out those vessels who are not working to bring them on the sea. You have no motivation at all, because if you bring more vessels, what you do is to increase the supply. If you increase the supply of the space the price of the containers goes down. So at the end, I would say, it’s a mix of things what happened. The demand, the international demand, increased a lot. The COVID 19, it’s true that it’s hitting hard. There are a lot of restrictions on the ports. There are some ports are working at 50% of the capacity.

Xavi Sanz:

The vessels they take, I don’t know, they take maybe 10 days, 15 days to unload, Patrick. So why should you take vessels out in the sea? While you see that to unload in Rotterdam, or south Hampton, or Felixstowe you need to wait for 15 days. You have no motivation to do that. So at the end, it’s a mix of things of happen. I think there are some forces in the market that do not want the prices to go back what it was in 2018.

Radio announcer:

93.9 Dublin, South FM.

Patrick:

So yeah, this doesn’t really auger very well for the future. What do you think will happen with ocean freight rates through 2022 and beyond?

Xavi Sanz:

I would be a bit pessimistic on that Patrick. Or, realistic on the same time. I think that it probably will be hard to see those 20,000 euros, or 20,000 US dollars per container that we sold to Felixstowe in this year. I think it would be hard to see again. Or, 25,000 we see from China to some parts of the US. But on the same time, I think it will be impossible to see those rates drop to 2,000.

Xavi Sanz:

I think that rates might go down a little bit still, but will keep high. We saw an increase of the prices went 10 times up. I think that for these 2022 the prices will still be like five times up what it was in 2018. I think Pat, because I was commenting to you, there are many interests in the international trade, and not only shipping lines. There are many interests that the prices do not go down, and on the moment that they go down, the market will readjust maybe. It’s very easy to bring them up again, you know?

Patrick:

Yeah. I’ve seen some clients here shifting their sourcing decisions, say from different parts of Asia, maybe to closer to home, to Russia, to Ukraine, to Turkey, to Morocco. Or, maybe some of my American clients looking at Mexico. That’s a trend, I think, that we is underway before COVID due to environmental, technological, and geopolitical factors. A sort of regional reconfiguration of supply chains. Is this a trend that you have noticed from your vantage point in China? Where do you see this going in the future?

Xavi Sanz:

Yes, Patrick. I’ve seen this, and I think that this topic has been, as you said, it was previous, pre COVID. This topic has been for many years, Patrick. But, it’s like all of us, “Oh, we should do this. We should do this.” But we never do it, right? I think the globalization is a present right now. Of course, it’s normal that many companies, they suffer a lot about that, and they’re suffering a lot. It’s normal. It’s normal that many companies, they look for an alternative, for suppliers who are near their headquarters. I think that for some companies it can be good.

Xavi Sanz:

Of course, it can be good. It can be feasible. It can be workable. It’s true. But you know, all the industrial areas and everything that they’re not born from one day to another. Right? As we move on, China is so far, it’s going in a so high speed. They have been growing so much lately, and we have seen many, for example in Europe. We have seen many companies in Europe that they closed. Or in Morocco also, right? There are many factories also that they left Morocco. So, it’s difficult that now you want, all of a sudden, to find a supplier in Morocco.

Xavi Sanz:

Well, you didn’t buy to Morocco for the last 10 years. Now you expect that to find this same product that you want in Morocco. While maybe that area is no longer there. So what I want to say is that it can be workable for some companies, Patrick, but I think it’s a bit difficult. On top of that, I’m seeing here in China that China has the capacity of production. One thing is, if you can find the same product in another place, which it can be, the other thing is, are they able to produce the quantities that you want? Do they have the production levels that you request? That’s another point, right? It’s not only finding a new supplier, but it’s also making sure that they can produce and they can deliver the product that you want.

Patrick:

Yeah. It’s not a simple question. There’s lots of factors to consider. So, what do you think should be the main factors to consider for company owners, and managers, when developing their logistic strategies for the future? Say, for next year, and for beyond?

Xavi Sanz:

I would… Well, this is my humble advice, Patrick, because I’m not one to give advices to too many managers. But, I would say just to focus on two things. The first thing is to work more closely with the suppliers. To work more closely with the suppliers. I think that all of us are suffering. I think it’s very important to work with your suppliers. Sometimes, we look for different, “Oh, I’m going to buy this in this supplier. I’m going to buy this in another supplier.” It’s good to diversify the risk. It’s good. It’s good not to have all the eggs in the same basket. I agree on that. I think it’s important, for example, not to have all the supply, for example, in China.

Xavi Sanz:

For example. And this point could be good that you mentioned, to look for an alternative. But saying that, I think it’s important to work closely with your suppliers, talk to them and listen to them and tell them what is your forecast and everything. So work good with your suppliers, because most of us, we depend on them. The second thing, Patrick, is the price of the logistics. As I commented to you before, I think the price of the logistics will keep up already. People know that. I think that by the time, right now, I think that all companies should have updated their selling prices because the logistics went up. I think that at the first stage, many companies, they absorbed this. They absorbed this increase in the logistics because they were not able to increase the price.

Xavi Sanz:

But come on Patrick, 2022, it’s a new year, it’s a moment to update the prices. In this increase in the logistics, you should put it on your P&L and put it on your product, on your cost forecast. Once you put this cost and this cost is part of your cost of the product, and the market can accept it, then just forget about logistics, because logistic will be high anyways. So, just focus on what you do best.

Patrick:

Yeah. So it could be a case of, as you say, in Spain, “New Year, new life.” Right?

Xavi Sanz:

Yes, exactly. New year, new life. Ha ha!

Patrick:

So as we come to the end of the interview, Xavi, it has been really interesting. I think we’ll change gears here a little and maybe just ask you some questions about yourself. Living in Huangzhou as you do, what kind of things do you like to do in your spare time when you’re not working?

Xavi Sanz:

Yes. When I’m not working, which is unfortunately it’s not that much time, Patrick. Because, we work in logistics and people are expecting… Working globally you have customers in Europe, you have customers in Latin America. When customers in Latin America, they wake up, it’s already eight o’clock, nine o’clock at night here. They expect to reply something. I would say I’m a gentle guy, you know? So, I think it’s always nice to reply sometimes. So anyways, jokes aside, I’m a very familiar guy, Patrick. I’m a father of three kids, wonderful kids. I’m here with my wife who is also working. Well my time, my free time, is spent with my kids. I try to do some sports, but I do it on my lunch time so I can take advantage. My free time, I spend it with my kids, Patrick.

Patrick:

Excellent. Are you reading or listening to anything at the moment? You know audiobooks, podcasts, and so on that are inspiring you and that you would recommend to listeners?

Xavi Sanz:

Yes. I’m trying always to be updated. Basically I like a lot, all those topics about sales. I like it. I also like the topic about China, and related to that, I’m reading right now one of the guides from Daniel Disney. He’s a sales guy in LinkedIn. The book he’s called the Ultimate LinkedIn Sales. It’s a book about, I don’t know if you heard, it’s a book about sales. How to take advantage of LinkedIn. I think LinkedIn is a very good platform nowadays. It’s very professional. I think it’s very useful right now on this online. So I’m trying to learn a little bit more, be more present on the net, and be there.

Xavi Sanz:

Then one other book I’m also reading, but I’m taking this more [inaudible]. It’s called The Governance of China from Xi Jinping. It’s a book about some of the talks of Xi Jinping, the president of China. While reading the book, can see, and you can imagine what will be China in the next year. Because in China, China is a country where they plan things. It’s so huge country that they need to plan things. They don’t plan things from one year to another, like it’s in Spain, for example, or the Western countries. These guys, they’re doing like a 10 to 30 years planned. So, they have a really long term view. A long term vision on the country and everything. I’s a very interesting book that it’s teaching you what will happen on the next years.

Patrick:

Okay. How can listeners find out more about Across Logistics and the services that you provide? Whether in Europe or in Asia?

Xavi Sanz:

You can always reach me also always in LinkedIn Patrick, as you know, Xavi Sanz. Also in our website, www.AcrossLogistics.com, or my email, Xavier, X-A-V-I-E-R @AcrossLogistics.com. Or if not, Patrick, they can always contact you right?

Patrick:

Sure.

Xavi Sanz:

Feel free to connect me.

Patrick:

Exactly. Thank you very much, Xavi, it’s been an absolute pleasure. Wish you every success personally and professionally in the future.

Xavi Sanz:

Thank you. Thank you very much, Patrick pleasure was mine. Thank you.

Patrick:

Thanks to our listeners also for tuning in. With any comments or questions, drop me a line on pdaly@albalogistics.com. So, keep well and stay safe until next time.