News and dates Supply Chain Risk Management: An Interview with LOGSOL Senior Logistics Planner, Christian Schaller
Supply Chain Risk Management: An Interview with LOGSOL Senior Logistics Planner, Christian Schaller
Our senior logistics planner, Christian Schaller, answered questions at Businesstalk am Kudamm on the topic of "Just-In-Time & Corona: Significant sales shortfalls reveal weaknesses".
1. The Corona crisis showed the weaknesses of Just-In-Time management with long supply chains. What impact did the lockdown have on your customers?
In terms of the automotive industry, the Corona crisis led to strong uncertainties regarding the supply situation in the short term. In the medium and long term, the pandemic had an impact on all forward planning: some plants had to be closed for days, weeks or even months. A large number of our customers in a wide range of sectors suffered considerable losses in sales and earnings.
Would you say that just-in-time management was a weakness in itself?
The demand-synchronized concept of just-in-time management implies that stable processes and low inventories achieve high flexibility. Accordingly, one can work efficiently. However, in the event of unexpectedly large influences on the supply chain, such as a pandemic, it has only limited resistance. This means it can withstand this situation for a few days, at best a few weeks. In the further course, the influences on the supply chain become so great that it breaks off. The cost and effort to maintain this supply chain is higher than any supply disruption and stabilization. Thus, it can be concluded that Just-In-Time supply is not a robust solution and can only respond inadequately to volatile influences.
3 Would the supply chain also have collapsed if it had not been a Just-In-Time supply chain?
In principle, higher inventories could have led to longer availability for production and trade. However, given the scope of the pandemic, it is likely that this would have merely postponed the problem.
4. What short-term supply chain management measures did you implement with your customers during the Corona crisis?
In addition to government health protection measures, companies sought to create transparency within supply chains as well as manage their bottlenecks in the short term. They moved from a largely automated process to a manually monitored and controlled process to ensure availability for their own production. This process is also known as shortage control. Another short-term measure was the implementation of hygiene protection measures in the supply chain - the physical interfaces had to be fundamentally separated, including: Time slots for truck drivers in warehouses, donning of protective equipment, no independent loading and unloading of trucks.
5. Will companies rely on higher warehouse capacities and shorter supply chains in the future?
Cost pressures remain high. To ensure continued low warehouse capacity as well as a responsive supply chain, multisourcing may be a solution. This means that companies are broadening their supplier base, especially in order to avoid territorial risks. Another option can be insourcing, whereby the balance between cost and risk must be evaluated on a case-by-case basis.
Possible risks can be examined by means of supply chain risk management audits - we have also already carried out such audits and examined possible behavior in the event of a crisis for our customers. What is new here is the initial situation: In the event of an impact on a limited region, production was previously relocated to the nearest area. As of now, this has to be completely re-evaluated due to the current worldwide pandemic.
6.Will there be a stronger focus on European suppliers in the future?
Basically, one can first assume that fewer border crossings also entail fewer risks. In this context, the topic of nearshoring can be taken up again. In addition to shorter distances to the place of demand, the advantage also lies in the fact that companies have significantly more options with regard to supply chains as well as transport modalities.
The trend toward de-globalization will continue in the future. Even before the Corona crisis, people had started to move production from Asia to Turkey or Portugal for cost reasons.
If you have any questions about supply chain risk management, please feel free to contact us at any time.