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Crisis management to solve massive supply problems

A fire breaks out in a factory in the US state of Michigan on 2 May 2018 and causes several explosions. The incident paralyses a production facility of the American automotive supplier Meridian Magnesium Products. The problems at Meridian led directly to production standstills at prominent car manufacturers. This example is intended to illustrate how reactive management of supply chains can become an important lever.

Reactive and preventive supply chain management

Today supply chains are characterised by increasing complexity in terms of their depth and the geographical distance between individual suppliers, as well as growing dependencies and requirements in terms of production and delivery timing. A 100% preventive coverage is neither economically reasonable nor practically feasible. Accordingly, the availability and the use of crisis management is indispensable to ensure supply and to reduce the extent of damage in case of supply problems.

Characteristics for supply-related difficulties

  • The production systems of a supply chain do not produce enough.
  • The produced parts do not have the required quality.
  • Logistics does not transport sufficient parts.
  • One link in the supply chain fails due to financial problems.

In reaction to a crisis, individual approaches and specific tools must be applied to get the supply network up and running again as quickly as possible. A frequent characteristic of internal production-related difficulties is reflected in a deficient OEE (Overall Equipment Effectiveness) – as a measure of the supply categories production and quality.

The focus is on the technical and organisational availability of production resources, as well as on production time losses due to quality problems. Another possible trigger for supply problems is logistics – interference may occur either in-house due to insufficient logistical control within the company or between companies in the supply chain. For instance a possible Brexit can lead to longer logistic processing times. And finally, financially triggered supply problems have an immense impact on the downstream production steps. Insolvency-related failures or strike-related incidents at the suppliers can trigger production restrictions at OEMs. A recent strike at Audi‘s Hungarian engine plant led to a complete production standstill at Audi‘s Neckarsulm plant.

The process of reactive supply chain management

Minimum requirements must be guaranteed by bottleneck control in a first step. The next step is to analyse the underlying causes with the help of the documentation of all reasons for disruption and the recording of the associated disruption times and then to quantify them with the help of measurement and control variables. In this context, portable, plug&play units for the collection of diagnostic and / or production data play an increasingly important role. Measures to remedy the situation must be implemented, continuously monitored and checked for their effectiveness. The assignment always ends with the structural qualification of the supply chain and therefore a stable supply without special measures over several months.

The complexity of ensuring supply is linked to a large number of influencing factors. Different manufacturing processes such as prototyping, coating or assembly in the specific methods required, the geographical and cultural position of the supplier locations and other factors need to be considered.

For a crisis management a wide range of specialised experts, who react to the supply problems with the appropriate tools, is required. In this regard, KBC draws on a competence network with over 400 specialists who have been able to solve more than 20 massive supply problems with all partners in the respective supply chains in the last two years alone.