Building resilience to deal with supply chain shocks
The frequency and severity of these types of supply chain shocks is increasing, and disruption is becoming the norm. As Julian Fischer, Partner at McKinsey & Company observes, “If I look at supply chain at the moment, and the clients that I serve in their supply chains, there is a perfect storm, which is brewing. The amount of disruption that we see at the moment is just unparalleled.”
As a result, businesses around the world are looking to build more resilient supply chains that will help them to achieve operational continuity. The COVID-19 pandemic and the Red Sea situation are examples of large-scale global occurrences. But the butterfly effect means even smaller, more localized incidents – such as industrial action or material shortages – have a significant knock-on impact on supply chains.
German manufacturer Freudenberg understands the importance of end-to-end supply chain visibility and process excellence in maintaining operations during a crisis. It was hit hard by material shortages during the pandemic and – with 18,000 raw materials used to produce over 20 million sealing products every day – transforming supply chain performance became a top priority.
Freudenberg launched a co-innovation project with Celonis to track material flows worldwide. Now it can see how bills of materials depend on each other, analyze inventory levels, understand what can be produced, and identify which customers can be served. As well as seeing the real-time impact of material shortages on downstream processes like production, it can also understand the indirect dependencies on procurement and sales. This puts the manufacturer in a strong position to proactively implement the best possible solutions and effectively handle supply chain disruptions.
Freudenberg is far from the only business to transform its supply chain following the challenges of the pandemic (as well as other recent disruptions like the Ever Given container ship blocking the Suez Canal for six days). Many others have begun to increase visibility and optimize key processes, and they’ve been better placed to cope with the Red Sea situation as a result. Whether it’s moving from a just-in-time to a just-in-case model, prioritizing critical orders, or seeking alternative routes, modes of transport, and suppliers, many businesses are already relying on improved processes to help them deal more effectively with the current disruption.