Technical article
Strategies for protecting supply chains: Having alternatives is essential
Every company wants to be able to respond quickly to change—but sometimes it lacks the know-how to make it happen. Environmental disasters, outbreaks of infectious diseases, military conflicts, and the imposition of new tariffs are just some of the potential disruptions to supply chains that can have devastating effects on businesses. This makes the seamless design and management of these very supply chains all the more important, as they are now more critical to business success than ever before. Those who closely analyze their sales, demand, and production processes can proactively plan their various supply chains to ensure seamless coordination and product availability. Due to increasing uncertainties at the political and geographical levels, it is essential to run through alternative scenarios, evaluate various options, and enable transparent decision-making along the supply chain—and to be able to change these quickly if necessary. Larissa Fahrmeier, Director at KBC, and Martin Betz, Director at KBC, discuss strategies for comprehensive supply chain protection in an interview.
Supply chains have rarely been as vulnerable as they are right now. Should companies therefore shift their sourcing strategies more toward local sourcing?
Local sourcing stands in contrast to global sourcing and enhances resilience. Shorter transport routes help mitigate unforeseeable negative events. A comprehensive approach to procurement and sourcing strategies involves a tailored assessment and combination of local and global sourcing to create more robust supply chains.
How can supplier management respond quickly enough to bottlenecks?
Companies have learned from crises and improved their ability to respond. In supplier management, direct control has proven to be an effective response to bottlenecks. It is crucial to ensure transparency regarding inventory levels and to maintain close, regular communication with suppliers. This requires the early identification of bottlenecks and an assessment of their impact. Based on this, specific measures such as special deliveries, alternative routes, or alternative sources of supply must be identified.
In addition to procurement, production sites are becoming more unpredictable. Is it possible to take precautions here, at least in some areas?
Working with our customers, we have seen that this is feasible, provided the master data is of high quality. It must be determined which products can be manufactured even if certain parts are missing. Two key questions are: “Which parts can be retrofitted, and which ones would cause a production stoppage?” and “What alternative production plan is possible?” This information must be available in advance and at all times.
What opportunities can the use of business intelligence (BI) and analytics offer when making decisions?
One factor in decision-making is striking a balance between speed and quality when responding to short-term crises. With more comprehensive data and smarter analytics, situations can be assessed more thoroughly. BI solutions enable the integration of various data sources, the development of scenarios and forecasts, and thus open up new possibilities.
You prioritize a 360-degree view. What does that mean, specifically?
Many of the points mentioned relate to short-term responses. To be prepared for the “new normal,” we must create space for developing solutions. Further steps include creating a risk list—ranging from supplier creditworthiness to compliance with legal and contractual requirements, including those related to sustainability—assessing potential impacts, and defining a specific strategic approach to managing these risks.
Change takes time, so it is crucial to proactively set the course. Just like a ship, you have to take its size into account and adjust its course with foresight. This requires a dynamic mindset in procurement, constant scrutiny of the supply chain, comprehensive data transparency, and a flexible supplier structure to ensure greater resilience.
This article appeared as a supplement in the April 9, 2024, issue of Handelsblatt (link to the e-paper).
