In conversation with Alex Basso of Vizibl, Matthias addresses:
- What is Supply Chain Resilience?
- How do you build a resilient supply chain and what aspects should you focus on?
- What effect has Covid19 had on supply chains and what can companies do to make sure they are less vulnerable to supply chain disruptions in the future?
- How do you build a resilient supply chain and what aspects should you focus on?
- Could you share some examples of what best looks like in terms of supply chain resilience?
We’re here to talk about supply chain resilience. So let me start from the beginning. What is supply chain resilience? What does it mean?
Matthias Mette 0:17
That’s a good point. I think you find particular these days a lot about supply chain resilience. And I think you wonder sometimes what people put under resilience, some people probably think it’s a nice buzzword and and everybody must be now, resilient, even those who haven’t been before. And I think we come to this when we talk about COVID-19. But probably the most basic definition when you when you think about resilience, I mean, when you when you look at how social and organisational science define resilience, I think it’s the ability of a system to withstand changes in its environment. I mean, that’s one definition of resilience. The other is when you come more from a psychological area, it’s more the ability of individuals to adapt in the face of adverse conditions and developments. And I think when you put this together and you transfer this to supply chain and procurement, I think then it’s basically the ability of your supply chain to withstand changes in the environment and therefore also having the ability to adapt in a positive way to changes to structural changes to new conditions. So make your supply chain adaptable to these changes that we currently see very much and prepare for changes, be flexible and be adaptive and have some contingencies in place to react positively. I mean, and probably not only reacting but also acting together with your suppliers. I mean, that’s probably a bit how I would describe supply chain resilience.
And then you were mentioning at the beginning, that you were talking about COVID-19. And I have to I have to ask you at this moment, what effect do you think COVID-19 has had on supply chains? And what can companies do now to make sure that they are less vulnerable to supply chain disruptions in the future in the in the next year or two?
Matthias Mette 2:19
I mean, the effects, most of us have seen them. They’re quite tremendous. I mean, it’s, I mean, and probably all the effects are not yet visible because many companies countries are opening up. Many companies are trying now to ramp up. I think we will probably see in the next weeks and months, a lot of challenges in the supply chain, but COVID-19 has done some very structural changes. We have emergencies. We have a lot of companies, whether they’re OEMs, tier ones, tier twos that have real trouble in their supply chain that need to, to work with disturbances that are quite heavily with even risking the current supplies. And we are currently in the quiet, comprehensive re-ramp up and companies are struggling to manage this, I mean some areas, some industries, are probably just facing the long term recovery, some others are more optimistic that they recover in a more short term. So COVID has has shown probably, how sensitive supply chains, particular global supply chains, are for different kinds of disturbances. I think it would be not fair to say, if you would have been resilient enough before you would have coped with all this. I mean, nobody could have forecasted. I’ve never seen I’ve so far haven’t seen a supplier risk management system that was prepared for this kind of scenario that we are currently facing, but I think what you can see in COVID-19 is that companies who probably in the past had already invested in resilience in very sustainable risk management are probably better prepared to what they are now facing to have contingency plans in place to work on these problems and also having collaboration forms in place with their key suppliers to also help now in finding very short term, very adaptive solutions to changes in the market, changes in demand, changes in in logistics that you have to now to cope with. And I would say the companies who have done the investment and have done something on this, they probably are better prepared now for doing this. But I would say nobody is perfect now. Everybody has his problems, minor and major problems. And I think there will be a lot of learnings out of COVID-19 for a lot of companies, how to improve resilience and also risk management in the future.
Exactly. And this is what this is what I wanted to ask you. So right now I’m pretty sure loads of companies are going to focus loads of effort on these just in the case this happens again, because we’ve seen, well, maybe at the end of the day crisis are not the exception. They they are kind of the norm. So this could happen again, in any in any other form. If you were asked right now, they asked you Matthias, how do you build a resilient supply chain and what aspects exactly should you focus on? What advice would you give?
Matthias Mette 5:35
I mean, many companies are currently more concerned with solving the crisis. I think, currently, it’s probably a bit too early to already talk with customers about how to invest in sustainable risk management. I think when we talk with companies, they all need to currently solve the crisis and for solving the crisis, you may need to be very pragmatic also you have to be quite short term. Look for data sources for ways of communicating interacting with your suppliers you may not have done before, you need to look for alternative sources in a very quick and speedy way. And you need to review some of your own processes in order to be quicker in qualifying and ramping up alternative sources. So I think that’s what what companies are currently concerned with, I think the face of talking with companies about investing into sustainable resilience management, I think it’s still to come. I think it will come in the coming months when companies are probably found the parse to boards the read ramped up, I think then it’s a good time to take the learnings from each company, even companies who had risk management before. I mean, I’m not only talking about companies who have not done sufficient investment before I think even companies already invested in resilience management and in risk management, they will review this and they will need to strengthen they need to think about, do I have the right data sources? I mean, most data sources are looking backwards. Because you use financial data of the past you knew you use performance data of the past you may have information of suppliers that even in the most intelligence sources are always backwards looking, but you probably need to develop capabilities to look more predictive and prescriptive. So how to better forecast how to plan scenarios how to interactive in a, in an instant way with your suppliers in both ways to exchange changes on the market side, whether it’s your market, the supplier market in a in an instant mode and to develop very quick responses to this. So without delays, often you have a lag time before supply chains can adapt to a situation and so on. I think that’s where you will probably invest digital collaboration, new data sources. I would also say they will invest in contingency management. I mean a lot of people have said we have we know what happens the if/then situation we have played through and now they face it and they are not able to have an if/then so I think contingency plans for some key supplies for some key suppliers, to have that in place to have scenarios in place where you can use them. I think there will be investment in the coming six to 12 months to be prepared. And I would not say only prepared for another COVID-19 I think we all hope this is not in the near to middle a medium term future but normally what companies prepare is, you know, regional problems, it could be specific supplier problem. It could be natural disasters in a certain region. It could be trade wars, it could be other political situations for which you normally prepare your supply chain and where you need to be resilient. I mean, this this kind of global resilience that you suddenly have to have, it’s probably very hard to prepare for. But you need to prepare, nevertheless better for these kind of disruptions. And I would say for these adverse conditions that you currently face in your environment.
Interesting. Interesting. And let me let me ask you a final the final question Matthias, you were talking at the beginning and you said obviously, that you know that you haven’t seen any perfect any companies that have dealt with the situation perfectly, which means no one was prepared for the whole situation. You were saying that before? However, could you share or do you have in mind any examples of what let’s say best looks like so in terms of supply chain resilience, even though it’s not perfect, but what practices, what companies, what examples come to your mind? Again, what you would describe this as best?
Matthias Mette 9:49
So good question. I mean, I will not name company names here probably. I’m not sure whether you were expected accepting expecting this but probably, I can describe a bit what companies I have seen who have done something. I mean, there have been companies, let’s say, after the last big crisis, a financial crisis about 12 years ago, 11/12 years ago, there have been companies in some industries, who really invested. They normally call it risk management. But I think it moved into resilience management, that they said we need to have a better collaboration with suppliers, more transparency in our key suppliers. We need instant data. We need to have probably even joint targets and KPIs that we managed together with our suppliers. So companies have developed this. And I would say not only because the corporate risk management I think the best supply chains have developed these resilience capabilities, not because somebody in the corporation said we need to improve our risk management and you need to contribute. Which I still see by the way, that procurement departments are just doing risk management because of corporate risk management wants them to contribute, I think the most effective have been where the supply chain departments have seen their own value in actively managing this across the board across all the categories, commodities, suppliers end-to-end whether its strategic, financially but also operationally and having defined clear parameters to watch and to, to always monitor and not only internally but also with the suppliers. And I think that even a few companies I’ve seen who have developed a quiet effective N-Tier transparency, which which I think is probably then the really the Champions League of resilience management that you not only look at your direct tiers, but you also have visibility on the N-Tier capabilities where they where the disruptions are normally are even today, I mean, the disruptions are normally not with your tier ones. They are always often in the supply chain of the tier one. So, I have seen companies who have established N-Tier visibility, have defined together with a key strategic suppliers you know what to watch in the supply chain of the suppliers and having a regular update of the situation, reviews together about you know risk points of issues, opportunities, but also how to act on on some weaknesses and risk. The problem is that often the systems are still quite heavy. I have seen that even if companies have done this N-Tier visibility management, it requires a lot of efforts. So I think that the next generation would be to have the right digital platforms to further facilitate N-Tier management so that this is also in terms of effort, reasonable, it has instant data and you can act on this even more, I mean agile, quicker and so on. I think that’s probably the next step. But some companies at least have done the investment. I think they also now better prepared to see where the disruptions are in the supply chain. And they have the basis probably now with further digital means to improve this kind of management. So, I would say some industries that I saw in aerospace and in automotive, I saw players either on the OEM side, but also on the tier one side, who have done this in the last 10 years. But I think they will develop this further. Other industries. I think they probably still have to do something, but it’s probably not an issue of the industry. It’s it’s individual companies have done more or less. And the efforts to do this a quite different.
Just thing we’ll keep, we’ll keep an eye on that for sure. So Matthias, I would I could ask you many, many, many other questions. However, I want to I want to end it here. Thank you so much for shedding some light on on supply chain resilience, as you said a very broad topic, but it’s always good to get some thought leadership on one on all of these. Thanks a lot.
Matthias Mette 14:21
Thank you. My pleasure. Thank you Alex.