Technical article
Crisis management to address severe supply problems
Munich – On May 2, 2018, a fire broke out at a factory in the U.S. state of Michigan. Several explosions occurred. The incident brought a production facility of the American automotive supplier Meridian Magnesium Products to a standstill. Because immediate action was not taken, the problems at Meridian led to production outages at major OEMs. This example illustrates how reactive supply chain management can become a key lever for change.
Reactive and Preventive Supply Chain Management
Today’s supply chains are characterized by increasing complexity in terms of their depth and the geographical distances between individual suppliers, as well as by growing interdependencies and demands regarding production and delivery schedules. Therefore, 100% preventive protection is neither economically viable nor practically feasible. Accordingly, having a crisis management plan in place and implementing it to ensure supply or minimize the extent of damage is essential.
Characteristics of care-related difficulties
- The production systems in a supply chain are not performing well enough.
- Logistics is not delivering enough parts.
- The parts produced do not meet the required quality standards.
- A link in the supply chain is failing due to financial problems.
In the event of a crisis, it is necessary to respond with tailored approaches and specific tools to get the supply network back up and running as quickly as possible. A common indicator of internal production-related difficulties is reflected in poor OEE (Overall Equipment Effectiveness)—a metric used to measure the production and quality aspects of the supply chain. The focus here is on the technical and organizational availability of production resources, as well as on production time losses due to quality issues. Another potential trigger for supply problems is logistics—disruptions can occur internally due to inadequate logistics management within the company or between companies in the supply chain. For example, a potential Brexit could lead to longer logistics lead times. Finally, financially driven supply issues have a massive impact on downstream production steps. Insolvency-related outages or strikes among suppliers can trigger production constraints at OEMs. For instance, a recent strike at Audi’s engine plant in Hungary led to a complete production shutdown at the Audi plant in Neckarsulm.
The Process of Reactive Supply Chain Management
The first step is to ensure that minimum requirements are met through bottleneck management. The next step is to analyze the root causes by documenting all sources of disruption and recording the associated downtime, and to quantify them using measurement and control parameters. Portable, plug-and-play data loggers for recording diagnostic and/or production data are playing an increasingly important role in this process. Corrective measures must be implemented, continuously monitored, and evaluated for effectiveness. Ultimately, the goal is to structurally strengthen the supply chain to ensure a stable supply in the long term without the need for special measures.
The complexity of ensuring a reliable supply chain is linked to a wide range of factors. Various manufacturing processes—such as molding, coating, or assembly—must be taken into account, along with the specific methods required for each, the geographic and cultural context of supplier locations, and other factors.
Effective crisis management requires a wide range of specialized experts who can use the appropriate tools to address supply chain issues. To this end, KBC draws on a skilled network of over 400 specialists who, working alongside partners in the relevant supply chains, have resolved more than 20 major supply chain issues in the past two years alone.