For several months now, many people have been experiencing just how vulnerable the global economic system is to disruptions. Whether it’s large furniture, a PlayStation 5 or a new car, there are delivery problems with many items and, in some cases, waiting times of several months. For many companies, the global shortage of chips has been particularly drastic. In numerous industries, sales fell in 2021, and things are not expected to improve any time soon. The current year will also be one of fits and starts according to the forecast of the industrial association BDI. “Despite the full order books, the lack of microchips, components and raw materials will continue to impair production for a relatively long period of time,” says BDI President Siegfried Russwurm. These bottlenecks reduced industrial value creation in Germany by over €50 billion in 2021, and a similar impact is expected for 2022. The economic losses also have medium and long-term consequences on various levels. The realms of business, science and politics are all analyzing the fragility of supply chains and drawing corresponding consequences. Companies are discussing measures such as near-shoring, multi-sourcing and redundancy capacities. The political debate about technological sovereignty continues to pick up steam. Scientists, meanwhile, are developing platforms for resilient supply networks, as well as other methods for making supply chains less vulnerable.
Scrutinizing processes, simulating crisis scenarios
Until these activities bring some relief, however, companies need to take other measures to secure supplies for their production processes. VDE also offers general support in purchasing and procurement: through VDE Global Services, supply chain management assistance ranging from reviews of possible suppliers in Asia to outgoing goods checks are available. Here, VDE Renewables focuses on companies and project managers in the field of renewable energies. “Our approach consists of a detailed, customized service concept that’s geared toward all stakeholders in the energy industry,” explains Burkhard Holder, CEO of VDE Renewables. In normal times, the experts at VDE Global Supply Chain Services aim to ensure that ordered goods can be delivered in the required quality on the agreed schedule. However, regional lockdowns and travel restrictions are also making corresponding audits more difficult. “Our inspectors haven’t been able to visit factories without making various arrangements,” says Michael Wenzel, key account manager for supply chain services at the VDE Testing and Certification Institute. This was another chance for digital communication channels to shine as a means of performing virtual inspections, for example. “Pre-shipping inspections also had to be transferred to a hybrid process in some cases,” says Wenzel. In such instances, seals are now sent to factories, and sealed samples are then sent from there to the laboratory on site where the inspection is carried out.
Balancing efficiency and resilience
Many companies are currently putting their processes and supply chains under the microscope. This includes determining stock turnover, optimizing stock management and figuring out which components are critical and where they are produced. “It makes sense to do more dual sourcing – that is, build relationships with alternative suppliers – for strategically critical components,” advises Sylvia Trage, director of the consulting division at KPMG. According to a McKinsey study, one in four medium-sized companies plans to regionalize its supply chain. Bringing back certain areas of production (reshoring) or relocating them to more cost-effective places closer to home (near-shoring) are now on the agenda. However, companies face a difficult choice: should they prioritize efficiency or resilience? For many years, the paradigm was to remove unnecessary structures for cost reasons. Tools such as resilience engineering are now helping to recalibrate the relationship between these two aims. “With a performance-time curve, we can calculate how a company’s performance will suffer in the presence of various conditions or measures during a crisis,” explains Alexander Stolz, head of the safety technology department at the Fraunhofer Institute for High-Speed Dynamics. Comparing the results will then show which of two options is more resilient. The process also includes simulating crisis scenarios. Here, it’s not particularly important exactly how problematic situations are predicted. Instead, companies should make deductions on this basis and, for example, develop plans for a scenario where half of their workforce cannot work on site. Whether this is due to a pandemic, a natural catastrophe or a system failure is ultimately irrelevant. Work is also progressing on new technical solutions. Since last summer, the German Federal Ministry for Economic Affairs and Climate Action has been providing a total of about €44 million in the context of the Artificial Intelligence innovation competition to support four projects in the area of crisis prevention and management.