Building Supply Chain Resilience beyond COVID-19

Deloitte: The Covid-19 crisis has highlighted the importance of supply chain resilience and having a high level of transparency and visibility of end-to-end supply chain performance. Can you comment on achieving visibility of end-to-end supply chain performance in your industry and with your customers?

Maurizio Capurro: Different stakeholders have a different understanding of what is meant by ‘end-to-end’ in the context of supply chain visibility. For me ‘end-to-end’ has to consider the dimensions of coverage (for example – also including first and second tier suppliers), data quality and timeliness, which are all very connected. Looking across all these dimensions helps to achieve visibility of end-to-end performance.

There are often gaps when information provided by supply chain partners does not always cover end-to-end, or is not reliable or timely.

As a logistics provider we still observe many large companies relying on estimated order arrival date as calculated statically in their ERP rather than on more up to date and dynamic information. Fortunately, our systems enable us to predict estimated time of arrival with much greater accuracy which helps our customers to achieve even better visibility.

For example – we once conducted a data analysis with one of our large industrial customers who was relying on an estimated time of arrival of their internationally shipped orders. While their estimate proved to be only 20% accurate within a two day delivery time frame, we were able to immediately and significantly improve accuracy to 90% due to more reliable information and better tracking and forecasting. Relying on our data analysis to achieve end-to-end visibility can hold great benefits for our customers. AI and Machine Learning also have the potential to significantly improve visibility of supply chain performance as a result of their ability to provide more reliable data and fill many gaps in terms of coverage.

Deloitte: Apart from visibility, maintaining flexibility is also key for resilient supply chains. Can you comment on the supply chain flexibility in your industry and at your customers?

Maurizio Capurro: Flexibility is essential to adapt to underlying volatility and to manage exceptions within the supply chain. In my experience there are four important steps that need to happen to achieve flexibility and reduce volatility.

Firstly, collaboration with key customers and suppliers will help to reduce volatility and build resilience in the supply chain. This can be achieved by sharing plans and forecasts, as well as a view of the future between supply chain partners.

Secondly, timely detection is important to be able to react to ‘surprises’. Early detection of potential issues through appropriate warning systems greatly help to reduce exceptions and mitigate the associated cost and service impacts. Technology, like AI for example, can help with pattern recognition i.e. to detect what could go wrong before it goes wrong.

Thirdly, contingency planning is essential to manage the detected exception, minimise the impact of disruptions and save time and cost. Once volatility is detected it is important to have processes in place which clarify accountability and authority to approve decisions. This will enable quick responses. Lastly, it is important for supply chains to have alternatives when dealing with volatility – for example, back-up suppliers of materials and logistics, to help expedite the process in the event of disruptions. In this regard it is critical that even lean supply chains have some level of buffer or redundancy which could provide an alternative, in case of need. COVID-19 has shown that excessively lean supply chains can be very negatively impacted by a lack of alternatives. However, it is very difficult to forecast the probability and impact of disruptions and buffer and redundancy are expensive to build in. This makes it challenging for companies to build the business case for investment in redundancy.

Deloitte: How important is supply chain collaboration for your company? Can you share examples, where you are actively collaborating?

Maurizio Capurro: Collaboration across the supply chain is a must. While sharing forecasts and exchanging data are both very important, exactly how and which forecasts can be shared is still subject to discussion. For example, there are still practical issues in sharing not only demand forecasts, but even transportation forecasts.

While sharing data is technically very possible, data integrity can be a challenge. The data obtained is not always fit for purpose – for example, customer forecasts expressed in SKU’s/pieces need to be transformed into volume/space before it can be properly used. For data exchange to be truly effective, data needs to be made fit for purpose first. In this regard, Machine Learning can play an important role by helping to bridge the gap, transforming data so that it can be used to support more informed decision making. Close collaboration can also result in more integrated planning by the supply chain partners, since it enables a clearer view on crucial aspects such as where to hold stock in the global supply chain, how much to hold, where to redisposition or how to replenish. The context of Covid-19 has definitely given rise to more examples of active collaboration in response to the crisis – an interesting trend which we will continue to monitor.

Deloitte: To successfully build supply chain resilience, digital transformation and new technologies are often required. What role does real-time connectivity play in your company?

Maurizio Capurro: Innovation is central to our customer offering. For this reason, digital transformation is a key area of investment which facilitates real-time connectivity and the seamless data exchange between systems.

Some of the innovative technologies we’re using to optimise the supply chain are:

- Application Programming Interfaces (API's) which enable smooth and automated exchange of information with our partners
- Big Data which turns unstructured information into valuable insights, helping to make better decisions. This is particularly useful for predictive analytics and risk reduction
- Machine learning and artificial intelligence
- Internet of Things (IoT) monitoring sensors
- Blockchain technology

Deloitte: Is Machine Learning and AI in the supply chain a topic of discussion within your company and what other advanced digital tools are you deploying in your supply chain?

Maurizio Capurro: We use both Machine Learning and AI for predictivity and advanced pattern recognition. This helps to improve visibility and support quality management and predictive maintenance. We also use IoT tools for geolocation and to track cargo humidity, temperature etc. to ensure both quality and traceability.

Robotics/automation is used for warehousing to drive process automation and increase productivity. Blockchain is crucial every time it is key to have tamper-proof data exchange. We have already applied it on our Verified Gross Mass (VGM) Portal. We are also engaging in further blockchain projects with customers, suppliers and governmental bodies. A good example of our engagement with blockchain would be our participation in a consortium focused on the digitalisation of Bill of Ladings for sea freight.

Deloitte: The Covid-19 crisis has highlighted the importance of supply chain resilience and having a high level of transparency and visibility of end-to-end supply chain performance. Can you comment on how visible end-to-end supply chain performance is in your own company?

Juan Montes: Fortunately, even before Covid-19, we had already developed and implemented tools to screen our suppliers for operational, financial or reputational risks. Control mechanisms were already in place because the availability of certain supplies can often be volatile – for example – casting suppliers are becoming increasingly rare to find. During this challenging period we also increased the frequency and depth of our supplier monitoring with weekly updates for tier 1 suppliers. As a result, we were quite well prepared and positioned to navigate such a crisis.

Good collaboration within our network was also important to minimise risk and improve supply chain resilience. This included gathering information and insights from customers and other people on the ground, such as logistics providers and local sales managers, which we then corroborated with our tools. Supply chain risk management solutions, such as DHL Resilience 360 provided by our logistics providers, were also very helpful.

Deloitte: How would you go about further improving this visibility?

Juan Montes: It has become clear that irrespective of Covid-19, to stay resilient and remain competitive you need to put in place processes and tools to monitor suppliers and mitigate risks. With this in mind, we are planning to create a dedicated risk management model specifically for our supply chain based on best practices and global standards like ISO 31000 which provides a clear risk management framework. This effort will go some way to improving visibility and strengthening supply chain resilience.

Deloitte: Apart from visibility, maintaining flexibility is also key for resilient supply chains. Can you comment on the supply chain flexibility in your company?

Juan Montes: In the past our supply chain was very reliant on single sourcing for most supplies. To increase flexibility and mitigate risk we have now completely changed this model. We have localised our supply chains, without duplicating efforts and eliminating volumes. We try as much as possible to align supply and demand and make use of low cost and best cost options in the US, Asia and Europe. Except for a few items, most of the supply chain is now dual sourced regionally or even multiple sourced. Single sourcing happens for only a few critical materials and within the company. This has given us greater flexibility and control.

Deloitte: How important is supply chain collaboration for your company? Can you share examples, where you are actively collaborating?

Juan Montes: Collaboration is critical. The good quality of information that results from close collaboration helps to inform the best solutions. We have a clear policy of open information sharing and there is a lot of discussion across the board with both customers and suppliers who understand our need to build a flexible and resilient supply chain. In the context of Covid-19 there is a common understanding that nobody wants to have surprises.

As an example – there was once a shipping issue in Asia, where a supplier could not ship through their local shipping company. The problem was solved through one of our European country units that had good local contacts and could successfully engage the same shipping company. Learning how to navigate a local and global supply chain network and its ecosystem is important and can yield tremendous benefits.

Deloitte: How do you communicate and share data and information with suppliers and customers across your supply chain?

Juan Montes: Our dedicated supply chain model framework and supplier management approach covers communication, strategy, operations and other key functions. While we communicate a lot with our customers through the sales departments, there can be many other contact points on different levels. Some information sharing can also be informal. Relationships are important and the closer the customer and supplier relationships, the better the possibility to share information and work in an integrated and aligned way.

Deloitte: To successfully build supply chain resilience, digital transformation and new technologies are often required. What role does real-time connectivity play in your supply chain?

Juan Montes: Real-time connectivity is key for on time delivery. Last year we implemented a new ERP system with a sophisticated dashboard which enables us to track suppliers and delivery in real-time in all our facilities. The implementation of transparent logistics solutions such as Unifaun, a digital solution for logistics management, is a key differentiator for us. Such solutions should not only provide full visibility, including information on agreements and rates, but also feed into the ERP system and inform supply chain decisions.

Deloitte: Is Machine Learning and AI in the supply chain a topic of discussion within your company and what other advanced digital tools are you deploying in your supply chain?

Juan Montes: Machine Learning and AI is an important supply chain topic that we are currently looking into. We are managing approximately 100,000 customer order lines per year, a significant portion of which can be automated to improve efficiency. Other digitalisation efforts are focused on the supervision of manufacturing plants – especially cycle times, equipment efficiency and online quality performance of CNC machines. We are taking action on different levels to drive performance and the goal is to achieve real-time working in all facilities. We are, however, challenged by the fact that we are dealing with different types of machines and capabilities ranging from very basic to very advanced.

Deloitte: The Covid-19 crisis has highlighted the importance of supply chain resilience and having a high level of transparency and visibility of end-to-end supply chain performance. Can you comment on how visible end-to-end supply chain performance is in your own company?

Roeland Baaijens: While full supply chain visibility remains an ideal, Hilti has nevertheless achieved significant improvements in this area. Our single global ERP system definitely helps us to have greater visibility. Our S&OP (Sales & Operations Planning), in particular, also provides great insights based on real sales and enables more accurate forecasting. Additionally, moving to Salesforce.com will allow us to further enhance our forecasting and proactively identify opportunities in the market.
The transparency of our supply chain will also be strengthened by extending visibility into logistics with TMS (Transportation Management System) and working with BIM (Building Information Modelling) to develop an advance view of what we need to deliver to our customers in the construction industry.

Deloitte: How would you go about further improving this visibility?

Roeland Baaijens: Even though visibility with our key suppliers is very good, there is always room for improvement, especially with our tier 2 and tier 3 suppliers. In my view clear supplier visibility is mainly linked to the capacity a supplier has available to react to our demand, for example – to move from one shift to two shifts. To improve visibility we have to ask some key questions: Is there enough capacity? What is the bandwidth? How can we manage incidents/disruptions?
Adaptability is also important to improve visibility. Initially, the Covid-19 outbreak resulted in a supply crisis in China but by the time it reached Italy, it transitioned into a global demand crisis. Based on a firm-wide agreed working hypothesis about the impact of Covid-19, we moved from monthly S&OP to weekly S&OP to create additional agility for that period. Continuous monitoring and adapting the approach based on need is critical to strengthen visibility during such a time. Currently, we don’t need this additional agility and as it comes at a cost we have mostly moved back to monthly S&OP.

Deloitte: Apart from visibility, maintaining flexibility is also key for resilient supply chains. Can you comment on the supply chain flexibility in your company?

Roeland Baaijens: Our decentralised distribution structure helps to maintain flexibility. For example – we have more than 15 warehouses in Europe to enable next day delivery to customers. It means if one warehouse is closed because of a lockdown, we can switch to a different location. Understanding where flexibility is needed is also very important (for example – inventory or capacity).
Segmenting our production lines by volatility of the demand for product groups manufactured on that specific line (high, medium and low) also enables us to be more flexible. For example – a production line of products with low volatility can have a 90% utilization rate before extending capacity, while for other lines where products with higher volatility are being manufactured, we require more ‘over-capacity’ and need to specialise in fast change overs. Supply chain flexibility also requires clear and close communication and teamwork between logistics and sales.

Deloitte: How important is supply chain collaboration for your company? Can you share examples, where you are actively collaborating?

Roeland Baaijens: Collaboration is key, especially between sales and operations. We have, over time, improved the level of collaboration between these two key business areas. Communication and sharing of information by sales is important to ensure that operations can commit to agreed delivery dates.
Collaborating and building long term relationships with external providers is also important. We have long-standing co-operation arrangements and regular co-ordination meetings with our main logistics providers which allow us to give and receive clear feedback and navigate crises successfully. Similarly, long-term relationships with suppliers are also important to align our supply chain priorities and achieve successful outcomes.

Deloitte: Do you have any best practices to share with regard to supply chain control? What is the best approach to keep your supply chain under control?

Roeland Baaijens: Good S&OP is key for supply chain control. Transparency and flexibility between sales and operations ensures a common understanding that benefits everyone. We also have one system for our entire supply chain and a dedicated and centrally organised governance function. This, together with our holistic control framework and the trust and credibility built with key stakeholders over years, significantly strengthens control of our supply chain.

Deloitte: The integration of suppliers and customers into the supply chain are key to improve supply chain efficiency, improve customer experience and maintain supply chain resilience. Do you have any best practices to share with regard to supplier and customer integration?

Roeland Baaijens: Reaching out to customers to gain a better understanding of them and their pain points will help to integrate them into the supply chain and could also potentially lead to new opportunities. This is especially important for medium-sized and smaller companies so they can become real differentiators for their customers.
Building trust amongst all stakeholders is key to supplier integration. Good people skills and good judgement can often result in a win/win for both sides. Even if full supply chain integration is not possible, healthy levels of collaboration will already greatly benefit both sides.

Deloitte: To successfully build supply chain resilience, digital transformation and new technologies are often required. What advanced digital tools and new technologies do you see as best to build supply chain resilience?

Roeland Baaijens: There are several digital tools and new technologies that can help to build supply chain resilience. For example, using our own platforms and customised programs in some markets/regions we analyse our sales data using advanced data analytics. Our TMS also offers the possibility to make better decisions (for example – optimise pallets vs. parcel shipping). Real-time tracking solutions allow us to know where every container is in the world, at any given time at a reasonable cost. In case of a delay, new forecasts can be done based on previous data. Generally, the litmus test for any digital tool and new technology should be whether it generates data that can be used to make better decisions.

Deloitte: How often do you analyse critical dependencies in your supply chain and what are your main findings?

Michael Fürst: Once a year we analyse the entire supplier base, including suppliers, materials and single source, dual source and multi-source—amongst others. We then create a matrix together with category managers to identify what is working well and where there are improvement opportunities. During this challenging period, we’ve managed to remain on course by tracking our key suppliers on a frequent basis to detect any issues or potential risks. Regular communication with suppliers is critically important and helps to spot risks sooner rather than later.
In the past, when we had supply issues, we did a critical analysis of products, components and materials down to tier 2 and tier 3 suppliers—this included assessing inventory levels of suppliers but stopped short of analysing raw materials. This approach enabled us to keep our supply chain under control. As a result of that experience we now also keep a safety stock in the warehouse for some key components and materials.

Deloitte: Would you consider increasing local procurement and how would you go about it?

Michael Fürst: Developing a broad local supply base should align with growth strategies in those markets, i.a. in case of low lead times or if local content is required. As a result of COVID-19, we did experience some bottlenecks with logistics, specifically in the area of airfreight and shipments. We were, however, able to successfully address these challenges. Generally, supply chain strategies for local or global sourcing should be developed with a medium and long-term perspective in mind. While certain tactical changes can be made, reactive and short-term changes are not usually helpful.

Deloitte: What are currently the biggest supply chain risks in your company?

Michael Fürst: Life cycle management and planning for political changes are key to manage supply chain risk. We maintain a strong focus on life cycle management. Managing obsolescence of materials and sub-components is also essential to contain costs. The changing geopolitical situation, such as US restrictions on China, remains a key risk and has resulted in increased consideration of appropriate sourcing and geographic diversification. The supply chain is an important enabler of improved company performance and competitiveness. It is therefore important that risk is appropriately and proactively managed where possible.

Deloitte: What early-warning systems do you have in place to monitor potential risks and disruptions?

Michael Fürst: We track monthly KPIs for on-time delivery and quality. Our supplier qualification tool also helps us to monitor potential risks. Financial ratings of suppliers, share of wallet and competitor indicators are also considered. We manage dependencies by regularly analysing the share of ABB and its business units at suppliers, so that it does not reach a certain threshold of their sales. These early warning systems are supported by close relationships between category managers and suppliers which are key to spot and manage deviations.

Deloitte: What advanced digital tools and new technologies do you see as best to build supply chain resilience?

Michael Fürst: Any digital tool that helps to connect and integrate suppliers, as well as customers, and make the supply chain more efficient needs to be considered. All processes that are repetitive and can be automated should be automated. While we are already doing quite a bit in the area of category strategies, supplier integration, KPI tracking and automatic visualization, tracking is still happening more in a reactive rather than proactive or predictive way. Predictive capabilities will allow us to always be one step ahead. The digitalisation of supply chains holds tremendous potential to boost competitiveness into the future. For this reason, strong integration and connection of suppliers through new technologies needs to be a top priority.

Deloitte: How often do you analyse critical dependencies in your supply chain and what are your main findings?

Thomas Schwab: Before COVID-19 we analysed our strategic suppliers and critical dependencies every 4 months according to criteria that we had defined about 2 years ago—for example—single source, second source, country factors etc. However, COVID-19 was a real wake-up call and forced us to review this process and to do it more frequently and in a more focused way. The fact that risk factors and evaluation are different now also meant we had to change the weighting of our criteria. Some of the criteria and topics that are now weighted and focused on more strongly include—dual sourcing, geographic location, make-or-buy, resilience of production, design and technology, automation and digitalisation and stock and early warning systems.
Based on previous experience with Sars and Mers, we did not expect COVID-19 to become such a disruption. For example, regarding the sourcing of mechanical parts—while we had taken some measures with regard to our China sourcing, similar steps for suppliers in Italy or Spain had not been taken. Looking back, we could have done certain things better but we have learnt some important lessons along the way and we are now applying those learnings.

Deloitte: Would you consider increasing local procurement and how would you go about it?

Thomas Schwab: COVID-19 also made us review our landed cost. While sourcing in China is generally very inexpensive, this advantage is offset by the long delivery times until the container arrives. Countries closer to home might be more expensive, but the logistics is cheaper. A mix of both local and offshore procurement will allow us to keep flexibility in the supply chain.

Deloitte: What are currently the biggest supply chain risks in your company?

Thomas Schwab: Our biggest supply chain risk remains that if we cannot source key components the whole production comes to a standstill. A small, single part that suddenly becomes unavailable can cause great disruptions. For this reason, it is important that we remain flexible to cover such a worst-case scenario. However, it is an illusion to think that simply increasing the stock of critical parts will avoid a production shutdown. Stock increases are only short-term measures. Better and more reliable counter measures would be to increase flexibility within our production networks to either compensate or to switch suppliers within one order.
A regular audit of suppliers is also necessary to mitigate risk. Such audits should have a broad scope, also taking into account specific geographic and other risks like political stability and natural catastrophes, apart from only focusing on financial health and just-in-time delivery. Early warning systems are also extremely important and automation and new technologies like AI can help to better detect patterns and potential risks.

Deloitte: Can you comment on how visible end-to-end supply chain performance is in your own company?

Thomas Schwab: Full visibility is tricky to achieve. Ideally, everyone wants to have visibility up to their tier 2 and tier 3 suppliers, but it is not always possible. To have full visibility of the most important tier 1 suppliers is already great. For some electronic parts we have good visibility of tier 2 suppliers i.e. a good sense of what is going on or even a direct contact in place. While new technologies and automation can help to increase visibility, you would need more investment in resources and time to incorporate and process additional data to get the best value out of it.

Deloitte: What advanced digital tools and new technologies do you see as best to build supply chain resilience?

Thomas Schwab: Currently, the degree of usage of digital tools differs in each part of the supply chain i.e. from our customers to ourselves, from the suppliers to the factory, during production and from the factory to the customers. Whereas digital technologies are already fully integrated in production, the digital integration of suppliers is lagging behind. In this respect much more collaboration and automation are required. Digital maturity from the customer to the factory is also already high – customers can route their orders directly through to the factory using our e-commerce online tool and can make changes on the way. Such digital maturity of the order process should also be achievable in procurement.
We could increase efficiency, quality and resilience by using digital technologies more often and better in our supply chain. However, we should remember that achieving resilience is dependent on the depth of value creation and can also differ from region to region. With this in mind, regular exchange and collaboration within the industry is key, as well as us in Europe learning from our colleagues in Asia and the US, where despite the challenges being different, depending on what and how you produce, the lessons can be applied across geographies.

Deloitte: How often do you analyse critical dependencies in your supply chain and what are your main findings?

Andrea Lai: We perform a complete risk assessment of our supply chain twice a year. Every six months all our suppliers are assessed from both a financial and operational stability point of view. Segmenting suppliers according to critical dependencies as well as financial impact and volumes, is important. We realised the importance of using learnings from past crises, for example—the financial crisis of 2008/09 and natural catastrophes such as earthquakes—to inform future risk mitigation. We cannot afford to apply a narrow mindset and think that risk assessment is only about financial stability. Once a risk is identified there are usually quite limited measures available to mitigate that risk, such as developing a second source, increasing stocks or re-engineering products to reduce dependency on single source. We need to have a 360-degree view to take the right actions. We’ve also realised that the biggest suppliers are often the less critical ones. The real risk can originate from a “Mom-and-Pop” shop that provides a single critical screw and it can fall off the supplier radar due to its small spend. Taking a broader view helps to keep everything in sight.

Deloitte: What are currently the biggest supply chain risks in your company?

Andrea Lai: Ongoing geopolitical tensions, and the global trade wars that result from that, are currently the greatest risks for global supply chains. It is more likely that factors such as anti-dumping duties and other protectionist tariffs could force localisation of supply chains, rather than COVID-19. Actually, the pandemic did not cause any major supply or production interruptions for us. The main issue was the increased cost of logistics.

Deloitte: What early-warning systems do you have in place to monitor potential risks and disruptions?

Andrea Lai: Our experience has shown that the best early warning systems are close supplier relationships which help to flag issues early enough. Advanced digital technologies and automated tools are often hindered by delays in data and reporting, whereas having our people on the ground enables us to gauge the environment more accurately and timeously.

Deloitte: Can you comment on how visible end-to-end supply chain performance is in your own company?

Andrea Lai: In our company achieving 100% visibility of end-to-end supply chain performance with just the tier 1 suppliers is a near impossible challenge. The size of the pool is critical, the smaller the pool—for example twenty suppliers—the better the likelihood of achieving full visibility. As the supplier pool becomes bigger, full visibility of performance becomes harder to achieve. Good visibility should rather mean having a clear view on critical dependencies, such as supplier quality. This is possible to achieve, even in large pools of suppliers. It is also important to have a strong supplier function in place.

Deloitte: What advanced digital tools and new technologies do you see as best to build supply chain resilience?

Andrea Lai: While there is an abundant market for smart supply chain digital technologies like the cloud, AI or predictive analytics, the devil often lies in the detail. Digital tools need to be reliable and able to monitor a broad supplier base for risks—including both big global suppliers with available data, as well as smaller suppliers with data of a different quality. While digital tools have come a long way, harvesting their full potential invariably depends on the quality of the data that is mined. Maintaining close supplier relationships and an active presence on the ground still remains the best way to build supply chain resilience, especially for the early warning system and quick, clear and transparent communication that it facilitates.
As COVID-19 has shown, the most important lessons we are learning are not necessarily about new technologies but a return to the basics like focusing on people and relationships.

Deloitte: How often do you analyse critical dependencies in your supply chain and what are your main findings?

Mario Fürst: Our supply chain is based on a holistic approach that comprises the steps ‘Prevent—Detect—Respond’ and concentrates on minimizing risks. The Code of Conduct for Siemens Suppliers and Business Partners is primarily based on the principles of the UN Global Compact and the International Labor Organization, but it is also reflected in our Business Conduct Guidelines, which are binding for all employees. We constantly analyse critical dependencies; especially and faster during COVID-19. Thanks to our own supply chain software solution we still remain flexible and efficient across our global shop floors during this period. Many industries, for example automotive or food and beverages, experienced more strategic challenges such as finding new partners and additional suppliers etc.

Deloitte: Would you consider increasing local procurement and how would you go about it?

Mario Fürst: Localising procurement across the board is not easy. While industry and trade promotion agencies would like to strengthen certain production locations, some areas or components within the supply chain do not offer much choice because there might be only two or three suppliers of such parts globally.
Nevertheless, some industries and global players have been able to fine-tune their procurement by building up second and third sourcing concepts to achieve better production flexibility. Whatever the procurement model is, it will have to factor in sustainability which is increasingly becoming a driver in decision making.

Deloitte: What are currently the biggest supply chain risks in your company?

Mario Fürst: Siemens has more than 90 000 suppliers in 150 countries and manages a procurement spend of CHF 40bn (2017). The ability to deliver and maintain an efficient supply capability globally across the whole portfolio remains the biggest supply chain risk. We prioritise the integration of our values and integrity into the supply chain to both build resilience and drive sustainability. Any collaboration with suppliers requires them to adhere to our code of conduct. Non-adherence remains a key risk. To counter this, we have an early warning system that monitors supplier adherence, tracks deviations and defines the consequences of wrongdoing.

Deloitte: Can you comment on how visible end-to-end supply chain performance is in your own company?

Mario Fürst: The IT connectivity in our supply chain is very deep and supports good visibility. We have our own software to integrate our suppliers and communication is kept as simple as possible—including from factories to suppliers, especially regarding quality and product liability. Tracking is also possible for customers back to single suppliers. With 250 factories worldwide, great harmonisation is required to ensure visibility. Technology and collaboration are especially key when managing supply chain performance during crisis situations or catastrophes.

Deloitte: What advanced digital tools and new technologies do you see as best to build supply chain resilience?

Mario Fürst: Digital tools such as automation, cloud or predictive analytics can definitely help companies to build supply chain resilience and remain competitive. The earlier you integrate these new technologies, the better the impact on your supply chain. For example, already integrating technology at the product development stage means data and tools can be shared with potential new suppliers and valuable time can be saved.
Ideally, advanced digital tools should be used from ideation through to implementation and should support both innovation and recycling across the whole product lifecycle.