Erne Fittings Relies on ‘The Safe Connection’

For Erne Fittings, the world’s leading supplier of butt-weld fittings, “the safe connection” is more than just a slogan: Passion and perfectionism are put into its safe pipe fittings for permanent welds. Every safe connection is also a strong pillar of success in risk and supply chain management and a solid foundation that Erne relies on during today’s multiple crises.

What did we learn from supply chains? Single sourcing is dangerous because being heavily dependent on only one supplier does not enable companies to spread the supply risk. The Covid-19 pandemic has also demonstrated that the single-sourcing effect on supply chains can also be caused by a dependency on several suppliers from only one country.

In China, President Xi Jinping’s Zero-Covid approach brought a sudden halt to entire regions of this huge country. Nothing works anymore, no one leaves their home, nobody works or produces things, and no one exports or imports.

We’re all in the same boat

Container ship crews – mostly Asian – were no longer allowed to board or leave a vessel. Container ports came to a standstill, and the entire cycle of transporting and shipping goods was bogged down – until today.
Lockdowns which blocked the global economy ensued. As the restart did not take place simultaneously, the world economy struggled to restore its rhythm. Add to that the war, following Russia’s invasion of Ukraine. While Ukraine has become the main supplier of raw materials and intermediate goods for many industry sectors, the Western world saw itself forced to act by imposing sanctions on Russia.

Sanctions, not only harm Russia’s economy in the medium and long term but which negatively impact the energy supply chains of the Western world in the short term.

The day when Erne’s world stood still 

In March 2020, the world woke up to a pandemic. A scenario that caught virtually every country and every business unprepared and unaware – Erne Fittings was no exception.

Our customers supply products and services to pipeline engineering and construction companies, so-called EPC companies that are active in the energy industry all over the world, providing products needed to plan and erect ready-to-use plants. They focus on power plants in the oil, gas, nuclear, and district heating sector as well as on hydrogen plants, given the agenda for decarbonisation.

With the onset of the energy crisis and the plunging oil price almost all our clients brought their projects to a sudden halt. New projects in the pipeline were stopped as well or no longer pursued. Our suppliers were forced to either reduce their production or cease it altogether. The market came to a standstill overnight. The pandemic, however, also demonstrated that costs alone were not the only decision-making criteria for management. While laying off staff may have reduced staff costs in the short term, this decision would have been toxic as soon as operations were resumed. The same applies to supply chain management.

Even though today, three years later, multiple crises – a seemingly never-ending pandemic, a geopolitical apocalypse, the energy transition against the backdrop of the climate crisis – present an array of new challenges, Erne Fittings is on track and fit for the future with its strategic and enterprise risk management:

Erne is fit for the future

  • Our supply chain and procurement management is based on long-term and trustworthy partnerships. What matters most are sustainability aspects, quality, and delivery capabilities, not prices. The safe connection is an essential technical and an equally important human factor for our success. 
  • Procurement difficulties and the increasing cost pressure forced us to streamline our product portfolio. We optimised our entire supply chain and grasped new opportunities as we strongly believe that in the midst of every crisis lies great opportunity. We knew that the world would once again need pipe fittings and that we needed to be ready for this day, being leaner, more efficient, and more productive. Our plan worked. At Erne, we optimally positioned ourselves for our clients’ changed needs and behaviour patterns in turbulent times. Today, more than ever, we are both customer and supplier of choice.
  • We realised quickly that the high volatility in prices in our business sector changed the behaviour of our customers. While the quantities ordered are smaller, the order intervals have become shorter and more frequent. We adjusted our supply chain accordingly and optimised our production processes. Our state-of-the-art high-bay storage now plays an even bigger role. It enables us to ensure faster deliveries to our customers, despite all the adversities in procurement markets.
  • Today’s turbulent times have shown us once again just how important trust and sound relationships are for a well-oiled supply chain. In many cases, it was not the availability of materials that caused problems. Rising costs for both raw materials and energy led to higher purchase prices and in turn to higher levels of receivables while quantities either remained unchanged or were lowered. Credit insurances, however, could no longer provide adequate cover. It came down to a matter of trust – trust that all the goods that were ordered could be paid as well, even though the insurance only provided partial cover. Erne has built up this trust with suppliers and banking partners over the past 120 years. The sold trust basis paid off time and again during the crisis.
  • Our strategy to pursue a close proximity to customers in Eastern Saudi Arabia served Erne Fittings Middle East Co. Ltd as an effective instrument to manage the supply chain in this important market – reshoring from our customers’ point of view, if you like. Erne Fittings Middle East now manufactures and provides local customers with the entire product portfolio of carbon steel elbows. Aramco, the world’s largest oil producing company, honoured our colleagues’ efforts with the “LOCAL MANUFACTURERS QUALITY EXCELLENCE AWARD 2021“ – a wonderful acknowledgement bestowed upon Erne Fittings Middle East in February 2022.
  •  Erne is more than ready to tackle the energy transition. We are the first company to have received a TÜV Süd certification for our hydrogen-compatible fittings. The 100 percent hydrogen compatibility allows us to be a first mover in this sector as well and a reliable partner for our customers.
  •  A lot still needs to be done to make the energy transition work. The current crisis forces Western economies to rethink and reposition their energy policies. To be independent of oil and gas, we must quickly build new facilities, such as LNG terminals or gas pipelines. Our biggest risk, however, is the required interim supply of gas which we need to manufacture the products that will ensure our energy supply of the future.

Turbulent times require thorough planning and a carefully thought-out course of action. Securing raw materials and energy on the supply side for the long term, although customer demand indicates smaller volumes delivered faster in shorter cycles, is a business risk and a challenge for the entire supply chain. A mere mathematical calculation of the risk is in this case not good enough as all players in our market rely and depend on each other like never before. Longstanding, personal and trustworthy relationships have become an essential element of our risk management. The same applies to our customers, our suppliers as well as our partners, such as banks and insurance. What we cannot influence is the geopolitical risk and with it the level of uncertainty that we feel in the global economy. This has drastically increased over the last five years.

About Erne Fittings GmbH

Erne Fittings, founded in 1920 in Vorarlberg, Austria’s most Western province, is the world’s leading manufacturer of top-notch butt-weld fittings for the approved market, focusing on the energy industry. Erne Fittings employs about 350 people at its production facilities in Schlins, Mürzzuschlag (Austria) and Jubail (Saudi Arabia) and achieves an annual turnover of about EUR 70 million.

Bernd Klemisch

Member of the Executive Board and CFO
Erne Fittings GmbH

T+43 5524 501 102  

Related Insights