Building a Crisis-Proof Supply Chain

by Henning Hatje08.04.2021

We want to look back at our DPC “Risk & Crisis Management” and share our insights with you! Together with some interesting guests from the procurement space, we had the chance to discuss the topic of supply chain risk management in times of a crisis. Thanks to Gundula Ullah from Funke Mediengruppe, Sebastian Lücke from E.ON and Henning Hatje for leading this exciting debate.

Learn from previous crises

In times of an acute crisis, immediate actions need to be taken to keep business operations running and to minimise potential threats within the company’s supply chain. As a first step, the current situation and its implications on the operations have to be assessed. An emergency plan should then be developed in collaboration between management and departments. In such cases, a task force may be formed to facilitate fast communication and information exchange between top management and other relevant inside and outside stakeholders. Once an acute crisis has been brought under control, the crucial work only begins. A thorough analysis of the lessons learned should be directly implemented into a preventive risk management strategy in order to be better positioned for next crises. The relevance of preventive crisis management is indisputable when looking back at the last two years and should be prioritised at board level.

Preparation pays off in the long run

A proper risk strategy is a mixture of supplier management, project planning and execution and the right use of technology. Building a collaborative and sustainable relationship with key suppliers is essential to ensure a resilient and stable supply chain. For instance, fair price negotiations also in times of a buyer market will increase the chance that relevant suppliers will be available also in uncertain times.

Setting up an overall risk strategy is a complex and time-consuming process across departments and management. Ideally, a company should initiate the process in a non-crisis phase and start with setting up a risk taxonomy across the company. Depending on the capacities and size of the company, it may be useful to hire external consultant teams working collaboratively with the compliance department to assess the risk in Operations, Finance, Tech and Procurement. It is only at the end of the process that one should think about implementing digital solutions, always with the question in mind of what to solve and why.

Technology can unlock additional strategic capacity

Technology and human minds should complement each other. One can not replace the other. Digital tools can not solve the analytical and creative capabilities of a human mind. Especially an ad hoc crisis like the current one needs the knowledge of a procurement expert to conceptualise solutions and implement preventive measures. Technology should help in the sense that it takes operational and standardised work away from the procurement experts so that they can focus on the strategic issues. For instance, AI can be used in areas such as data enhancement and management, predictive analyses or in the form of procurement management tools.

The business case for digital solutions should be clear for everyone! Implementing and actually using digital procurement solutions is still a huge challenge for many organisations - especially for SMEs. After an acute crisis has ended, companies often fall back into old working habits instead of using the momentum to implement and leverage digital solutions along the procurement process. The providers of such solutions, in turn, should consider this when approaching customers by making sure that customers really understand the business case also in non-crisis times.

The perfect time to get started is now!

The number of supply chain disruptions in the past two years should be reason enough to get started right away and set risk management in motion. For many companies in Germany, a sustainable supply chain will soon become mandatory anyway. With the Supply Chain Act, which will be effective from 1 January 2023, companies are required to ensure human rights and environmental standards in their supply chains. The new regulation can be seen as an opportunity, as affected companies are now forced to act and can not push these tasks away for much longer. Setting up improved and transparent risk management mechanisms will be a competitive advantage, as those who have a better understanding of their suppliers also have a better data basis for their supply chain management.

Wenn Sie mehr darüber erfahren möchten, wie Lhotse Ihnen helfen kann, Ihre Beschaffungsprozesse zu verbessern, buchen Sie noch heute eine Demo mit uns!

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