3 Questions for Prof. Dr. Stannek
Stable supply chains in times of crisis
Prof. Dr. Guido M. Stannek will speak at Onventis Xchange 2021 on October 7 about the options for action regarding the upcoming supply chain law.
In advance, he explains the challenges supply chains faced during the Corona crisis, how they can be set up to withstand crises, and what you can particularly look forward to at his Xchange talk.
Prof. Dr. Guido M. Stannek
During the Corona pandemic, purchasing had to face new tasks. What challenges in the supply chains arose and how could they best be solved?
In fact, purchasing in many industries had to adapt to new challenges very suddenly and thus perhaps more agile and flexible than expected and also previously required. Overall, it was now in the short term to maintain business operations at all, to obtain the urgently needed materials and at the same time to manage supplier risks.
The biggest challenge from our on-site observations and consulting projects was the very sudden partly complete interruption of many global material supply and especially logistics chains. This force of global ad hoc supply failures was the biggest difficulty for many companies – despite partially existing dual-source strategies (which also only help to a limited extent or not at all in the case of a global lockdown) – and this coupled with the subsequent inefficiencies in their own internal supply chain in the form of higher overall costs, lack of delivery performance in the direction of their own customers and thus lost sales. Added to this were the typical symptoms of the bullwhip effect. Shortages or complete failure of input material deliveries were requested in other markets, from other suppliers or even at an earlier point in the value creation processes, which led to additional – in some cases self-created – shortages on the input material side, not inconsiderable price increases and delivery time extensions, if any were mentioned at all.
Only a few companies really came through this crisis well, but it was precisely these companies that stood out primarily due to their transnational and centrally controlled transparent risk management. In other words, we have to distinguish between what needs to be done differently in the future and possible short-term countermeasures. These short-term countermeasure options mainly consisted of approaching known markets that were still open and well-maintained network suppliers, or using possible material substitutes (keyword: innovation management) to escape the shortage and lack of supply capability. This paired with the safety device of exclusive production capacities with several sources of supply or the conscious early creation of additional manufacturing depth in the own enterprise increased and increases also in the future at least the probability not into a complete external dependence to get. In the future, the entire procurement network must be much more involved in the development of risk strategies in order to minimize supply risks and stabilize supply chains more sustainably.
What role does digitalization play in the sustainable stabilization of supply chains?
In our experience, digitization only helps when coupled with a comprehensive internal and external understanding of processes and their continuous improvement throughout the company and its stakeholders. The focus must therefore be on both the supply chains outside and inside the company if the digitization of processes is to be approached comprehensively and no predetermined breaking points at the company boundary are to be accepted. So if a company has analyzed its core purchasing processes for inefficiencies, then redefined and implemented them, then corresponding digital solutions with the help of diverse data and information sources can definitely help to automate and standardize other company processes and free them from operational risks. First of all, there are the seemingly simple processes such as automated confirmation of orders and delivery schedules by suppliers, supplier qualification that can be standardized in many areas, and the use of capacity management tools to compare actual and forecast requirements with supplier capacities at any time and to identify bottlenecks at an early stage. The same applies to the increasing importance of advance shipping notifications (ASNs) and real-time tracking of transport status via track-and-trace solutions in order to know when the goods will be available at the individual material level in uncertain times. Things get a bit more complex when it comes to AI solutions in the environment of advanced analytics, which allow inventory and delivery forecasts to be predicted with a higher probability of occurrence. But even for this, there are good tools available today, which we have already successfully implemented at customers and are still implementing.
What can the guests look forward to during your presentation at Xchange 2021?
The currently widely discussed topic of the Supply Chain Act will occupy larger companies in the short term, and medium-sized companies in the medium term, and will have a direct impact on our actions and our responsibility throughout the entire value chain due to the documentation and due diligence obligations that are now legally binding as a result. But even smaller companies, which are not explicitly in the focus today, should not sit back and be prepared for the fundamental requirements, because it can be assumed that the measures to be proactively introduced in order to counteract negative effects will also be mandatory for them sooner or later. I will show which requirements and challenges these will be for which companies, but above all how these can be approached in a structured way without immediately seeing the insurmountable mountain of bureaucracy in front of you.
Prof. Dr. Stannek, thank you very much for the interview!