Back to the roots – from the effects of the corona crisis on supply chain management

In recent years, supply chain management has been “optimized” in the face of globalization and cost pressure. This has led in some cases to absurd developments, where for example goods from Germany were transported to Eastern Europe, re-packaged there and sent back again, just to maintain the “low cost country” share. Or parts were manufactured cheaply in Asia, sent to Europe over eternally long transport routes, only to be built into machines or products here. All this now turns out to be the Achilles’ heel for project work during the time of the Corona crisis. Due to the crisis, delivery routes were restricted, production in Asia was suspended for a longer period or replaced by the production of other products that were necessary during the crisis. The current crisis will (hopefully) lead to a rethinking and reorientation of supply chain management.

A rethinking of supply chain management should move away from a sole focus on costs and towards new principles. A key principle should be the preference for local suppliers, who have short delivery routes to the place of performance (e.g. production plant) and at the same time a short reaction time in case of problems. At the same time, more emphasis should be placed on strengthening the local economy, building up medium-sized and therefore more flexible companies that can “breathe” more easily than monolithic conglomerates in times of crisis. This will also facilitate better compliance with increasingly rigorous environmental regulations, reduce transport costs and, above all, minimise transport risks, such as piracy, natural disasters or even labour strikes. The Corona crisis is a clear indication of just how dependent the automotive industry has become on certain materials, suppliers and regions.

Project managers and their clients should have more influence on procurement and achieve flexible supplier selection and supply chain management tailored to the specific needs of the project. Not only the price, which should be low from a procurement point of view, is a criterion in favour of or against a supplier, but also its proximity to the place of performance of the service, its general performance and the minimisation of risks in the provision of services. Projects should take a much greater interest in the interfaces with partner firms, analyse them pro-actively and assess them with regard to cluster risks (e.g. many deliveries from a single supplier or too many suppliers from a single region). As our environment is becoming increasingly volatile, “looking ahead” to identify possible unplanned events is more important than ever. Big Data and Data Analytics are certainly helpful here.

Project managers are thus increasingly getting into the role of an entrepreneur, a network manager, and are more concerned with the interfaces to the world around them than with planning and controlling the project within. This requires skills such as negotiation, assertiveness, but also cooperation, communication and coordination. Suppliers have to be actively involved in the setting up of the project, in the planning and, of course, also in the control. The closer the coordination between the participants, the better the project can react to unforeseen events. This can be seen, for example, in the case of the corona crisis in the food supply sector. Supermarkets that have close ties with local suppliers are currently much better able to react to strong fluctuations in demand than wholesalers trimmed to cost reduction.

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Author: Reinhard Wagner, CEO of Tiba Managementberatung

 

 

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