Letter from Italy
Elisabetta Quadrini, Newfren, Turin
For two years now the motorcycle components sector has been living with instability and unpredictability.First the pandemic, then the uncertainty in demand, then the surge in demand, followed by logistics and materials supply chain issues and inflation. Then? The conflict in Ukraine has catapulted us into a world plagued by scenarios that we are all only familiar with from the pages of the history books!
Our factories have been hit, like our lives, by issues that burden our daily routines and that no businesses have been able to prepare for.
Like many other companies, Newfren has worked hard to structure itself to overcome the difficulty of finding raw materials, to understand the reasons for the tripling of transit times for goods and to understand how to manage the volatility of pricing.
Like most manufacturers, some of our production processes have had to be adjusted and, in our case, we have been forced to modify some processes that have been established and perfected over more than forty years of experience and development.
We have had to look for different supply points too. ERP computer systems have had to be updated because the statistical data used for the calculations that govern the purchasing processes have been overtaken by events.
'wellbeing of our Ukrainian industry colleagues'
Here at Newfren, in January 2022 we were convinced that we had successfully rebuilt processes to adapt to the new scenarios - we were confident that our changes would prove to be robust and able to manage the challenges and variables that could affect our daily work.
Then, a month ago, hostilities began between two countries that play a key role in supplies to the manufacturing industry and commercial life in Europe and beyond.
Every bit of certainty achieved in two years of work is now being called into question again and, worse of all, our Italian industry is being weighed down by the high cost of energy - which affects the entire production chain.
Today we are again having to deal with daily increases - in both raw materials and processing. Our brake shoes are made from 90% die-cast aluminium - the costs of aluminium are increasing day by day and the foundries that die-cast our shoes are powered by gas, oil and electricity.
As I have said before, we here at Newfren are a lot luckier than some manufacturers, because we are so well established and financed. But the results are still that we are now having to manage a 30% increase in the cost of processing - in addition to the raw materials price increases.
'materials and energy costs'
Our brake pads are moulded on a steel support, the cost of steel has increased due to the high cost of energy, which is impacting foundries - but there is also a blockage in the availability of the large quantities of nickel that are needed for making steel alloys. Our foundry sources them from Ukraine, so they are directly impacted by the conflict.
At this point in time, we have enough raw material stock in our warehouse to be able to keep production going. The powdered raw materials we use for our friction materials have a shelf life of six months, so we are trying to build up stocks, so as not to impose continuous increases on this front too.
As far as brake discs are concerned, our stock of AISI steel raw materials (made in Japan) covers about the entire production year, but the costs of heat treatment, which is an energy-intensive process, have increased by 20%, and the grinding processes are also energy-intensive, and they too have gone up in price by around the same.
The most difficult thing to manage is that we are suffering the increases immediately - without any time to take planning measures.
This is just a little summary of our daily life, and, of course, we are just one manufacturer - however, most of all though, it is the wellbeing of our Ukrainian industry colleagues that concerns us most, and we are wishing them all the best in these uncertain and dangerous times!
