Senior Expert for Logistics, Supply Chain & Supplier Management
For years, disruptions in global supply chains have been on the rise. Until 2019, before the onset of the Covid 19 pandemic, they were primarily supplier-related disruptions or natural incidents such as weather, volcanic eruptions or earthquakes. Since then, the types of supply chain disruptions have changed dramatically. We highlight what they are and how they might be resolved below.
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In the meantime, global, market or social crises and disruptions such as Covid-19, lockdowns, trade conflicts, wars, but also shortages of raw materials and chips or staff shortages are dominating. With the conflict in Ukraine still ongoing, energy prices are also becoming more expensive, which is having an impact on manufacturing companies in particular.
Almost all companies, whether production or trade, are currently suffering massively from problems in the supply chains with sometimes dramatic consequences for availability and costs. The example of semiconductors is a good illustration of this: There are chips for which, before the Covid 19 pandemic, one paid EUR 14 per unit - today, 10 times that amount is payable on the spot market and, in exceptional cases, even up to 100 times that amount.
There is no relief in sight because, among other things, the extreme concentration on Taiwan in manufacturing (around 80%) allows little flexibility.
We don't want to indulge in pessimism here, but this trend toward disruption in global supply chains is real and will put us under pressure today and in the future. The increasing dynamics and drama of global supply problems indicate that there will be no quick end to this development. On the contrary, globalization, division of labor and networking have led to such complex interdependencies that any crisis anywhere in the world will immediately impact all supply networks as a disruption.
We are facing the biggest upheaval in supply networks in recent decades. In concrete terms, a number of trends in logistics and global supply chain management can be identified:
Regardless of the current degree to which a company is affected, all companies face the same challenges: Securing the supply of materials and goods and improving logistics procedures and processes.
Logistics, supply assurance and supply chain management are finally emerging from their often experienced shadowy existence. They are moving from being vicarious agents to becoming a new core competence in companies.
In these times, supply chain management is becoming a key competence - or rather, it must become one. What characterizes this competence and future resilience in the supply chain?
Everyone is talking about digitization, but many businesses - especially midsize companies - are still lagging behind. To remain competitive in the long term, more committed initiatives are needed.
The importance of digital processes and business models was recently highlighted by the corona pandemic. Many industries were doing extremely well for years. With full order books, there was no pressure to change and no need for rapid digital transformation. Digitization was often seen more as a field of experimentation for the "young savages" than as a strategic vehicle for the future. In addition, investments in digitization often represent an expensive risk for decision-makers with an outcome that is too uncertain.
And so, in an EU comparison, Germany is only in the middle of the pack when it comes to integrating IT into business processes, ranking only 18th out of 28 EU countries according to the "Digital Economy and Society Index". The main reason for the comparatively weak level of digitization is the reluctance to invest. Germany lags far behind countries such as the USA, France and the United Kingdom in terms of IT investments. Is there still a lack of fundamental conviction that digitization makes business processes better and more efficient?
Whether it's smart products, automated processes or digital business models, no company can ignore technological development any longer. And yet the topic of digitization is still not at the top of the agenda in many executive suites, because with so many task forces and alarm modes in times of crisis, board members, managing directors and executives from purchasing, production, quality and logistics no longer get around to thinking through the strategic digital challenges systematically and starting quite pragmatically.
But it's all quite logical: according to a recently published study by the University of Trier, companies that want to achieve specific goals with digitization - such as higher growth, better performance or cost advantages - have a higher degree of digitization. Or vice versa: companies with a higher degree of digitization rate their profitability and revenue growth higher than less digitized companies.
So the crucial question for digitization is: How do I differentiate myself from the competition? What will be necessary in the future and how will I continue to be successful as a company? Through low costs, highest quality, innovative products, excellent processes and/or best service?
And so, with increasing recession and cost pressure, reengineering, cost reduction or lean programs will certainly be launched again with a focus on process costs and performance. Use this opportunity for smart digitization projects as the key to transparency, lower process costs and improved or innovative new business processes!
But does it always have to be the expensive and risky projects? And where are the necessities and opportunities? The magic formula for smart digitization is:
All these criteria apply to logistics and supply chain management, because despite all the talk about digitization, logistics, supply chains and partner management in particular still usually suffer from more analog challenges in the company! Unfortunately, in the past the role of logistics in the company was mostly underestimated and little appreciated. Often, logistics was at the end of the information chain, but at the beginning of the supply problem, which led to expensive friction losses and frustrations in the operational business.
But also strategically, logistics processes and cooperation with partners are increasingly becoming the focus of necessary improvements due to global developments. In the future, collaboration with partners will involve a fundamentally different approach to the understanding of customers and collaboration, and the establishment of a completely new way of thinking and different overarching work processes. Out of the silo, into collaboration - intra-company as well as inter-company.
Better collaboration (between departments and companies) in supply will significantly improve business results. If you are lacking ideas, you should work with startups like TradeLink to strengthen your innovation!
Digitization covers a wide field - and even when its importance becomes obvious, it is not always easy to get started. Which processes are actually suitable to be digitized and how extensive, complex, expensive and risky can the change actually be? We have compiled tips for you to make the first step easier.
1. e-mails: Why don't you start your search for clues with the many Excel spreadsheets or, even better, with the many e-mails? Yes, e-mails were indeed once a great invention, but e-mails are not digitization! Unless they are meaningfully integrated into digital workflows, e-mails are merely the electronic version of manual or verbal coordination. They do not reduce the organizational effort, but often even increase the effort due to subsequent inquiries, follow-up questions and clarifications - often with a growing number of participants in the CC: Every one of us knows these e-mail tsunamis that block capacities and wear on the nerves. Put an end to it!
2 KISS: Keep it smart & simple, or: start with the simple things. What is meant here is not powerful IT flagship projects and rollouts that tend to get out of hand in terms of time and costs and whose risks every decision-maker shies away from. What is meant here is the digitization of daily work processes in agile, manageable, low-risk speedboat projects with simple solutions and quick successes. So-called low hanging fruits and quick wins are always very welcome in the company.
3. PFE: Avoid own over-engineering and use simple apps and standards as far as possible. The often perceived "Not invented here" (NIH) is the past, "Proudly found elsewhere" (PFE) is the future. What is meant is rapidly deployable, smart digital tools. There is now a new era of software and the best solutions are simple, intuitive and straightforward and are valued and embraced by users.
4. 80:20 rule: Segment your processes. Distinguish between the usual 80 to 90 % standard routine processes and the special 10 to 20 % exceptions or special processes that require clarification. Leave the repetitive standard processes to the software - here it is enough for people to check and approve results. But use the resources and skills of your employees for the important deviations and clarifications.
5. E2E: In the new end-to-end process understanding, always start at the end of your processes. Start from the process result and gradually check and improve the preliminary work at process. In logistics, the outside-in principle is a good place to start, for example, with the coordination process with partners. This coordination often still runs very intransparently and manually with e-mails, telephone, a lot of paper and effort. So start with delivery coordination between manufacturer and customer companies and the electronic exchange of delivery information, delivery documents and shipping documentation.
According to a recent own survey, TradeLink customers and users, want to realize the following goals of cooperation:
But which potentials and expected results, confirmed from many deployments, result from the use of transparent and digitized delivery coordination with partners, customers and suppliers?
Use digital workflow platforms for delivery coordination collaboration. Such platforms already exist and you don't have to be a prophet to say that the most user-friendly ones will prevail, especially when it comes to collaboration solutions. Collaboration needs to be user-friendly and the best and most effective solution is always the one with the highest user acceptance and the best usage by the collaboration partners.
TradeLink is the simplest and most effective form of delivery coordination on the market. Simplify Logistics, let us convince you.
