Publication
Strategies to protect supply chains: Having alternatives is essential
Every company wants to be able to react quickly to changes – but sometimes there is a lack of knowledge about how to implement them. Environmental disasters, infectious events, military conflicts and the introduction of new customs duties are just some of the potential disruptions to supply chains that can have a devastating impact on companies. This makes the seamless design and management of these supply chains all the more important, as they are now more crucial to a company’s success than ever before. Those who precisely analyze their sales, demand and production processes can plan their various supply chains with foresight to ensure seamless coordination and the availability of goods. Due to increasing uncertainties at a political and geographical level, it is essential to run through alternative scenarios, evaluate different options and enable transparent decisions 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, explain strategies for comprehensive supply chain protection in an interview.
Supply chains have rarely been as vulnerable as they are at the moment. Should companies therefore increasingly focus their sourcing on local sourcing?
Local stands in contrast to global sourcing and strengthens resilience. Shorter transportation routes reduce unforeseeable negative events. The comprehensive alignment of purchasing and sourcing strategies involves a specific consideration and combination of local and global sourcing for more robust supply chains.
How can supplier management react quickly enough to bottlenecks?
Companies have learned from crises and improved their ability to react. In supplier management, direct control has proven to be an effective response to bottlenecks. It is crucial to create transparency about stock levels and ensure close, regular communication with suppliers. This requires early recognition of bottlenecks and assessment of the effects. On this basis, specific measures such as special trips, alternative routes or sources of supply must be determined.
In addition to purchasing, production sites are also becoming more unpredictable. Is it possible to take precautions here, at least in some respects?
We have seen with our customers that this is feasible, based on the quality of the master data. It must be defined which products can be produced despite missing parts. Two important questions are: “Which parts can be retrofitted or will lead to a production stop?” and “What alternative production program 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 for decision-making?
One factor in decision-making is the balance between speed and quality in response to short-term crises. With more comprehensive data and more intelligent analyses, situations can be assessed in a more informed way. BI solutions enable the combination of different data sources, the derivation of scenarios and forecasts and thus new possibilities.
You prioritize the 360 degree view. What does that mean in concrete terms?
Many of the points mentioned relate to short-term reactions. In order to be prepared for the “new normal”, space must be created for the development of solutions. Further steps include the creation of a risk list, from supplier creditworthiness to compliance with legal and contractual requirements, among others.a. in relation to sustainability, the assessment of potential impacts and the definition of a specific strategic positioning in dealing with these risks.
Change takes time, so it is crucial to proactively set the direction. As with a ship, the size must be taken into account and the direction changed with foresight. This requires a dynamic mindset in purchasing, constant scrutiny of the supply chain, extensive data transparency and a flexible supplier structure for increased resilience.
Article published as supplement in the Handelsblatt in the issue of 09.04.2024 (link to ePaper, only available in german).
