Vice-president of supply chain management in the ARC Advisory Group, based in Charlottesville, Virginia, USA, Steve Banker, spoke to two industry leaders on the subject of supply chain risk management best practices last year, namely Klaus Niebur, the director of global supply chain risk management at Autoliv, and Jan Theissen, the managing director at targetP! Steve provides feedback in the article below.
Autoliv is the world’s largest safety system supplier in the automotive industry. This global, Tier 1 manufacturer is headquartered in Stockholm and had revenues of over $8 billion last year. It supplies airbags, seatbelts and steering wheels to most of the Automotive OEMs – companies like Renault/Nissan, Volkswagen, etc.
In turn, targetP!, is a boutique procurement consultancy.
The main takeaways from the discussions with Klaus and Jan are the following:
- The auto industry has made supply chain risk management a priority since the Fukushima nuclear disaster in 2011. As the Automotive OEMs improved their supply chain risk management processes, they then turned to their key suppliers to improve their risk management processes. Autoliv is a company that works hard to meet the demanding requirements for quality, innovation, and cost from their OEM customers. Because of that, they beefed up their crisis management capabilities following Fukushima.
- By the end of 2019, Autoliv realised that there were new technologies and supply chain risk management providers that could promote a competitive advantage in their risk management programme. These solutions can identify suppliers with financial issues, notify a company when suppliers have regulatory violations, provide intelligence on how things like natural hazards or port delays will impact a company’s supply chain, uncover the impacts of cybersecurity or political instability on supply chains, and detect several other types of threats to a supply chain in real time.
- Their implementation of a supply chain risk management solution involved changes to their processes and what their supply chain professionals were expected to do. The supply chain team understood the need for this kind of solution and Covid provided strong reinforcement for the need for this kind of solution. Professionals from procurement, compliance, logistics, sustainability, information-security and several other internal stakeholders all use the solution for different reasons. Klaus Niebur did not say which risk management solution provider they picked, but I suspect they implemented a solution from riskmethods. The implementation of this digital risk platform was supported by targetP!, a boutique consulting firm specialising in building holistic supply chain risk approaches.
- Implementing the solution involved cleaning up master data and mapping their complete global supply chain. The implementation was not trivial. Risk management solutions scrape data from hundreds of thousands of online & social-media sites, but Autoliv also has access to sources of information that they pay for. They wanted these diverse sources of information pulled together in one central, user-friendly location they call their “garage.” targetP! helped to develop and implement a comprehensive supply chain risk programme that included an effective governance structure, practical contingency plans and crisis response measures.
- Klaus Niebur spoke of risk management as a continuous improvement journey that would never end. There were several things they were both looking to accomplish in the near term. I wanted to circle back to Klaus and Jan and get caught up on their journey.
Klaus had previously mentioned that Autoliv was already doing digital supplier management, had digital sourcing solutions and was looking at real-time transportation visibility solutions to provide better predicted times of arrival for inbound and outbound shipments. In short, this risk management solution needed to integrate into their IT ecosystem. Their future vision was for risk management to be seamlessly integrated into an advanced control tower.
- In giving an update, Klaus confirmed it was still Autoliv’s goal to create this control tower. He said it would link all initiatives within the supply chain function and be enabled by the company’s digital solutions and all data sources. The plan is to build a holistic “one-stop-shop” control tower along all supply chain functions. This includes plant operations, inbound and outbound transportation, warehousing, demand planning and a comprehensive and running supply chain risk management ecosystem. As a first step, they are operating a “lean” control tower within their supplier relationship management system, known in the company as its “supplier board”. This intermediate step is more related to procurement and supply chain transparency. However, they are screening the market for technology.
One thing the company is looking for is a new way to create digital transparency upstream, including visibility to risks from its N-Tier suppliers. This is not just important for its supply chain teams, but also for other stakeholders including internal compliance, sustainability and even customer management teams.
- Klaus also addressed the problem of employees being swamped and being in need of better tools to do their jobs. In giving an example of how their risk management solution detected a threat and came to the rescue, he said one should imagine a scenario in which a company wants to invest in a new plant, in a country that they have not previously operated in. In the beginning, this company would not know all the risks related to that plant.
For example, to build that plant, the company would need to work with a construction company or companies. If it faced that situation, explained Klaus, its risk analytics would include financial assessments of potential suppliers for this construction project. Unhealthy companies could jeopardise the ability to bring the plant live on schedule. Further, the analytics could identify construction firms that could adversely impact a customer firm’s reputation if it selected them.
On the subject of extensive training and the changes in the way professionals were being evaluated, Klaus said a significant amount of time and money had been invested in internal training over the previous few months. In addition, key players – such as divisional risk managers – had undergone an education programme on risk management that had lasted several months. He had also run several webinars and summits for suppliers and customers to help them understand how important the risk management programme is considered to be.
- Klaus said constant training was needed because the company’s initiative is evolving over time. It was necessary to ensure that all the steps necessary to improve their resilience programme were understood, and that the new features and functionality coming online would be efficiently used in daily life. More training would be provided after adjustments to the core procurement process had been finalised. For example, improved resilience would require changes to the way the company conducted supplier pre-qualification, sourcing and procurement segmentation strategy.
- Jan Niebur said the next few years would probably be as challenging as the past year had been and that he believed the success of any modern supply chain risk management approach would be determined by how effectively businesses link humans and machines.
- Klaus said his company would continue to invest in its supply chain risk management initiative to help minimise any negative impacts from unexpected risk events. Its supply chain resilience was being strengthened wherever possible, involving more work with suppliers. The company considers digitalisation as one of the key success factors in this journey. However, he said, procurement would remain a people business and leaders should know that there would be no success at all if they did not invest in education. This is the reason for the constant development of people, ensuring improved maturity in the way in which they manage risks.
By: Steve Banker – www.logisticsviewpoints.com