Article

In today's interconnected world and evolving global landscape, businesses are increasingly faced with a range of global challenges, such as supply chain disruptions, geopolitical uncertainties or new regulatory requirements.

Companies are grappling with issues such as lack of visibility into supplier performance, rapidly increasing production costs due to rising wages and energy costs, volatile demand due to inflation, and the need to increase inventory buffers to manage uncertainty. In addition, geopolitical conflicts continue to disrupt supply chains, adding to the complexity of maintaining operational stability in a volatile economy.

These challenges highlight the pressing need for proactive and efficient management of supply chain risks and associated costs. The following solutions will enable a fast respond to current and future threats.

A key aspect of improving supply chain resilience and cost efficiency is identifying high-risk regions within the supply chain footprint. This requires thorough analysis of the geopolitical and environmental factors in locations where suppliers, manufacturing and warehousing facilities are based. By understanding these risks, companies can better assess the financial impact of potential risks and implement de-risking measures.

Risk mitigation opportunities:

• Using second-source suppliers for critical components reinforces supply security and minimizes dependence.
• Developing a decentralized manufacturing footprint across multiple regions increases flexibility to adapt to changes in demand or operational disruptions.
• Combination of hub and spoke models to optimize costs by balancing centralization with regional accessibility.

By harmonizing sales, operations, and financial planning, companies can create efficient and transparent forecasts that provide a holistic view of their planning context. This harmonization facilitates better decision making because all stakeholders share a common understanding of market dynamics and operational opportunities.

Risk mitigation opportunities:

• Continuously aligning demand and supply enables operations to remain flexible and quickly respond to short-term disruptions. This ability improves service levels, ensures product availability, and minimizes customer dissatisfaction during unforeseen events.
• Incorporating a scenario-based assessment into tactical forecasting can mitigate potential medium-term risks. This foresight reduces the likelihood of supply chain bottlenecks and enhances the overall resilience of the planning.
• Long-term strategic and financial alignment further strengthens supply chain performance and ensures that the business is prepared for emerging risks and trends.

Effective management of net working capital (NWC) increases a company’s flexibility and resilience to risks. Benchmarking against peers provides insight into the current performance and uncovers areas for the improvement in financial stability and operational efficiency.

Risk mitigation opportunities:

• Analyzing cash flow processes to optimize customer payment times and extend supplier payment terms to reduce financing costs and boost liquidity.
• Targeted inventory practices to balance employed capital and inventory levels to ensure readiness for supply chain disruptions while supporting strong financial results.
• Demand-driven manufacturing that minimizes waste and ensures inventory levels are aligned with market demand to avoid stockouts or excess stock.

Operational Excellence (OpEx) is a critical approach to optimizing internal processes and driving digitalization in production to enable cost-effective and risk resilient operations. To achieve this, all dimensions of OpEx — organizational development, process optimization, integration, and effective governance — should be considered.

Risk mitigation opportunities:

• Utilizing continuous improvement concepts to identify inefficiencies.
• Optimizing and designing of lean processes and well-defined roles to enable a fast reaction against potential risks.
• Real-time monitoring of the production line through integrated systems and streamlined communication facilities fast risk evaluations and decrease down-times.
• Robust back-up processes provide essential support when risks materialize, reinforcing supply chain stability and resilience.

A well-structured KPI system, from strategic to shopfloor level, facilitates effective analysis and mitigation of supply chain risks. In addition, supply chain analytics supports transparency within the supply chain to enable early detection of global disruptions and rapid responses, such as securing alternative supplier capacity.

Risk mitigation opportunities:

• Clear and structured KPI hierarchies enable swift root cause analysis and identification of key improvement levers, driving resilience and performance optimization across the supply chain.
• Tracking target deviations across plants supports timely organization of support and minimizes financial impacts.
• Alignment of strategic and operational goals ensures focused, cost-effective actions.

By leveraging solutions such as supply chain footprints, integrated business planning, optimized net working capital management, operational excellence and supply chain analytics, companies can effectively de-risk their supply chains and build resilience against current and future threats.  

Overall, these solutions do not only prepare organizations for risks and support risk mitigation, but also unlock levers for cost optimization, client satisfaction and sustainable growth in today’s unpredictable global business landscape.  

Malbrant S. / Wehinger J.