Franziska Nothofer:
All right. Good morning. Good afternoon, everyone. Thank you for joining us today for the session “Increased Supply Chain Volatility in 2024, How to Safeguard Business Value.” This presentation is presented by Everstream Analytics and Bearing Point. Currently, everyone’s microphones are muted, and if you have any questions as we go along, please just drop them in the Q&A box and we’ll make sure to answer as many as we can towards the end of this webinar. The session is also being recorded and you’ll receive a copy afterwards.
My name is Franziska Nothofer and I’m joined today by our two presenters Kalim Khan, Everstream’s Global Head of Value Engineering, who is playing a key role in strengthening supply chain resilience and delivering value for our clients, and Kalim will be joined by Laurent Charm, Senior Manager for Supply Chain Resilience at Bearing Point who is bringing his extensive expertise as a Risk Management Advisor. Together, they’ll be guiding us through today’s content. And now, let’s get started and I’ll hand it over to Laurent.
Laurent Charmes:
Thank you, Franziska. Hi, everyone. So, risk in supply chain, we can go to the next slide. Indeed, supply chain is still under challenge in 2024, just the continuation of the previous year. We see on one side, the regulatory pressure is still increasing, whether it’s the Lieferkettengesetz in Germany or other Supply Chain Act regulation, whether it’s in Netherlands or Switzerland or other countries. So, this is still the case, still going on. On the other side, we see multiple other risks which may disrupt supply chain. Especially, we see the conflicts, whether it’s in Ukraine or Middle East, which is changing a little bit and impacting, of course, strongly the supply chain, for instance, forcing ships to go around Africa rather than going in the Red Sea or things like that. We must not forget, as well cybercrime, which is three times more this year than the previous year, which was already on the trend of going up, certainly linked to the conflict zone that is happening. So all in all, companies need to do a lot to protect their supply chain on the one side, making it compliant on the other side, making it resilient to those disruptions. And what is important here is to look at that from the two perspectives, regulatory and disruption.
Laurent Charmes:
This is what we see on the next slide. On the compliance side, we’ve seen that on the first webinar in February, we look at what is important is to understand what service or goods are relevant for the regulations. It’s important to know which countries are relevant, are more sensitive, or what is the influence you may have on your suppliers to mitigate the risk, and as well, to a certain extent, get some partial end-tier visibility. On the interruption of supply, so here we’re talking more about natural disaster and geopolitical risk, et cetera. Here, we look more at the products, at your bill of materials. What are the important components? What are the delivery locations, the logistic routes? And we go a bit deeper in terms of end-tier visibility. Between the two, there is a commonality, which is for a company to quickly understand what is critical, what are the critical services or goods, what are the countries of operations where those services or goods are manufactured or transported, and what are the critical suppliers providing those critical services or goods. So this is the commonality, and this is exactly the good foundation for any companies who wants to manage supply chain risk efficiently. And for that, many companies are moving to a different operating model.
Laurent Charmes:
So moving away from the global China-centered supply chain model to something that is more regional, that is to multiple regional centers of gravity. Why that? Why center of gravity? Because it’s centered, it’s driven where the market demands, where the biggest market demands are. Those centers of gravity are, as I said, more regional, smaller, more agile, and they are built not only with cost in mind, which was the case when the former model around China was designed, but having more resilience within its DNA from the start. So thinking about risk, thinking about resilience, thinking about regulatory, local regulations, they integrate most of the critical elements from the supply chain.
So from R&D, but as well production, shipping, et cetera, making sure that all those elements are not too far. Because like this, you can reduce, of course, the risk of disruption. You know better your suppliers, you know better the regulations, and as well, you have sustainability goals in less CO2 emissions, having as well in the vicinity some possibility for the circular economy to reuse the products. So those centers of gravity, when moving to this new model, what is really important for our organization is to understand very quickly, to have a very quick transparency on the risk and on the exposure of the organization where they will be moving to this region. Understanding the local regulation and understanding the local risk, natural disasters, for instance, and having a complete view. As well, getting the visibility on tier one will be necessary. On this, if you want to know more details, I strongly advise you to look at Bearing Point’s white paper on the topic called The Heart of Future Supply Chain.
You will find the link in the in the chat box here. Whatever model you choose or whether you are working on a model today on this future model, getting visibility beyond Tier 1 is super important. Why that? Now we can go to the next slide. So, this is an example. So, if, for instance, you are in the electronic business, you have a plan producing your product, you have two suppliers, so you made your risk management good practice in exercise and made a dual sourcing. So, two suppliers provide your critical elements. You may think that you mitigate the risk, but those two suppliers may be supplied by the same ones, which is common in the electronic industry, for instance. So as you can see on this screen, you have a tier two supplier that provides both tier one dual-sourcing suppliers. And therefore, if this supplier goes down, both suppliers will not be able to deliver. This is the case very often. According to a McKinsey report, 51 percent of disruption occurs beyond Tier 2. Despite that, only 2 percent of companies have this visibility. Here, this is really crucial to get transparency and get an ongoing transparency beyond Tier 1. But this is not the only factor that will be important to increase resilience, as well having a comprehensive approach. This is what we’ll see on the next slide.
Laurent Charmes:
So not fixing things here and there, but really having a comprehensive approach towards risk. First of all, in terms of governance, setting the right tone in the company, setting up the right risk culture, defining the right risk indicators, driving really steering resilience in the company is important. Secondly, in terms of process and operations, provide the right tools methodology to operations to manage the risk, anticipate the risk, collaborate because risk management is a collaborative exercise and setting them the right business continuity plan to overcome any crisis. But all of this happens only if you have a strong digital foundation where you can see the end-to-end value where the risk can happen to have clean well-structured data and as well the right tool like ever stream analytic tools to provide transparency on the risk and these beyond the tier one suppliers. And when this is done you can really see a difference between the companies having invested in this type of approach compared to the other, this is what we see, because they are able even during the time of disruptions to go beyond and to survive disruptions. This what we see on the next slide. And yeah, Kalim seems to be blocked on one slide. And I hand over to you, by the way, on this one to protect the value.
Franziska Nothofer:
Brilliant. Many thanks, Laurent. Did we lose Kalim?
Laurent Charmes:
I think we kind of lost Kalim. Hi Kalim, can you hear us?
Kalim Khan:
The chart you see on the left here is from Gartner, and I think it very well illustrates our mission from Everstream, which is really to minimise the impact of disruptions. You can never eliminate disruptions. You can see on this chart here there are two lines.There’s a darker blue line that dips quite low when a disruption occurs and then returns back to full steady state operation after a certain amount of time. And the orange line represents more resilient organizations. So they see the disruption or the disruption happens at the same time, but they see it sooner such that the dip in production or capability is lower, they recover faster and get back to full production sooner. And I think that that grey area is the business opportunity, is the cost of operating in volatile supply chains and minimising that grey area is absolutely critical.
Laurent Charmes:
Can you please share again the presentation, because it seems we don’t see it anymore.
Kalim Khan:
Ah, right. Okay. It says it’s showing here. Let me go back…
Franziska Nothofer:
Yeah, this could be a technical issue. We had some issues with GoToWebinar recently. There we go. Now we can see the screen. We’re back.
Kalim Khan:
Okay, right.
Franziska Nothofer:
Apologies, everyone, just a slight technical issue.
Kalim Khan:
There we go, perfect, we’re back. Very sorry about that, folks. Okay, just a final point on this. The McKinsey piece on this slide demonstrated over a 10-year period, on average, companies are losing, approximately on average, 42% of one year’s EBITDA. So you could sort of average that over 10 years or per year as 4.2 percent EBITDA.
Laurent Charmes:
Kalim? Kalim, we don’t hear you. It seems you have some connectivity issue.
Kalim Khan:
These are all the different areas that we monitor as an organization that are critical to have the earliest possible visibility in your organisation so you can see here they cover the whole client source make deliver and I’m sure you your organisation is monitoring many of these but it’s sort of one of our core competences is really to monitor all of these areas through multiple sources paid and freely available to to give you the earliest possible view of what is going on in your supply chain.
Kalim Khan:
Our customers include many household names, Jaguar Land Rover, Siemens, and BAT. They’ve seen significant real measurable improvement in their organizations through using Everstream to build resilience into their supply chains. You can see here improved sales for Jaguar Land Rover, reduction in production stoppages for Siemens and reducing manufacturing lead times and improving on-time delivery significantly as well. So some great results companies can get by having that earlier wider deeper visibility into their supply chains. Okay so how do you do that?
Kalim Khan:
Okay so what we’re going to do today is take a few minutes to look at a supply chain here. This is an automotive company. And you can see at the right-hand side of this slide here that they produce three different models of cars that get shipped to nine different locations in eight different countries. And as we work backward in that supply chain, you can see the outbound lanes, the production plants, production warehouses, inbound shipment lanes, their tier one suppliers, and then right there at the very left-hand side are all their sub-tier relationships. And you can see here, 97 suppliers connected to 1,355 sub-tier suppliers. So it’s a complex organization, and monitoring that is a real task in itself. And that’s where we try to help our companies and customers to do that. So in order to do that, we’re going to take a look at the Everstream platform right now.
Kalim Khan:
So let me minimize that. How do I get rid of that? Can you see my screen okay?
Franziska Nothofer:
Yes, we can see your screen okay for the demo.
Kalim Khan:
Brilliant, brilliant, okay. So, this is that supply chain we just talked about mapped onto the world, yeah? And this sort of screen is typical in our customer organizations in their supply chain control towers. They’ll have a map like this showing real time what’s going on in the world. And if we just look at this now, just visually, we can see that there are two significant red areas. I think most of us understand this one here, which is, unfortunately, the conflict in the Middle East being highlighted here. And one that just came up yesterday, in fact, in this supply chain network. This is the aftershocks in Taiwan. And you can see here 28 facilities impacted in total and it is classified as a high priority area. So what we’re going to do, you know, as a head of supply chain risk, which is the role I’ll be playing today, I’m waking up or getting to my desk and seeing this alert.
And so what we need to do is understand a little bit more about it. Okay, so we’ll go into sort of incident panel within Everstream and what we can see here right at the top of the list is multiple aftershocks in Taiwan. It receives an incident score of 17. It is classified as severe. We can also see here seven facilities affected, 10 lanes, shipment lanes and two final products are impacted as well. This is definitely warranting our attention here to understand what’s going on. So we want go into that incident and understand a little bit more about it, okay? So we can see here the facilities that are impacted here. They are in our network here, these are suppliers. So definitely we want to take early precautionary actions to mitigate against this. So if we just look a little bit deeper into the incident itself, We’re getting a description here explaining what’s going on, what the magnitude was. But okay, now you know, which is already great. But I as head of risk management for the supply chain need to do something about this, okay?
And that would be really to create or instigate an action plan for this event, okay? This incident. So what we’ll do here is go in and create a new action plan. This is essential. So I will be the owner here. Okay. This plan will be, you know, to do. And then I create that action plan. So and then I need to choose which playbook I put in. And this is where you can really make a difference within your organization, because you can start standardizing what actions people take, and also making sure that people take the best practices in those circumstances for that situation, okay? So we’re actually going to, we have done our homework in my organization, and we actually have a supplier production stoppage playbook. I’m going to instigate this playbook, okay?
And what you can see here is a whole list of actions which will sort of look a little bit more closely at and so this is the supplier production stoppage playbook and you can see here trying to think of these actions or hoping that somebody knows what to do when something occurs or notify people is leaving things to chance actually there are two factors here that sort of help you in resilience is first of all, understanding and identifying an incident early, and that’s potentially an early being sort of in tier two or three or four of your supply chain, and then acting quickly, knowing what to do, and when to do it and who should do what. And so you can then as an organization be prepared like we are here in terms of dealing with that particular incident. And then once that’s underway, we then get into the job of managing those activities, making sure that things are running to plan. And if there are issues, how focusing on how to address them instead of deciding what we should be doing or who should be doing what. I’m going to stop the demo here.
Kalim Khan:
It was a very high-level view of the platform, but it gives you a flavor of the things we do and the capabilities that we have for our customers. This is a very deep platform with a lot of functionality and capability, and this is a small taster into where we are and what we can do. So what we’ll do is go back to our presentation. Let me do that here.
Franziska Nothofer:
Thank you, Kalim and Laurent. I appreciate the insightful presentation and diving into the demo today. And we have some questions that just came in from our attendees. The first one is around how long it takes to see results. What’s the usual timeline for obtaining results from sub-tier analysis?
Kalim Khan:
Typically, obviously it depends on the size and complexity of a particular supply chain that we’re looking at. But we would sort of, we often see four to six weeks as a typical timeframe to start discovering and validating that sub-tier network for an organisation.
Franziska Nothofer:
Okay, brilliant. Thank you so much. Okay, we have time for another question. Is it possible to receive disruption alerts from sub-tier suppliers and wouldn’t that lead to too much noise?
Kalim Khan:
It’s absolutely possible to understand and monitor your sub-tier and we strongly recommend that our customers do so but what we also do is we have we advise in terms of our customers capability of sort of filtering and improving by industry we’ve developed a set of industry specific filters to really improve the relevancy of alerts that you receive so you’re not getting bombarded with irrelevant or extraneous communications.
Laurent Charmes:
Maybe to complement that on top of the technology, this is where the right organization in terms of risk management is important. And if you have, for instance, a center of expertise will go first, will be a first line to drill down these and adjust those parameters as as Kalim was mentioning, but as well filtering as well seeing what is important and relaying that to the business is very important. So the organization part as well the operating model managing the tool is very important.
Franziska Nothofer:
Wonderful. Thank you both. We have one more question around value. So basically, how does visibility into sub-tier suppliers lead to cost reductions, and can you please provide an example?
Kalim Khan:
Sure. In terms of sub-tier visibility, this is really about seeing much earlier an incident and understanding and evaluating its potential impact on your organisation. And we could talking seeing something sort of 10, 12, maybe even 14, 21 days earlier than other organizations. And that really makes a big, big difference. In terms of an example, we identified for a large consumer goods company, a food manufacturing company, we did a sub-tier analysis for them, very similar to what Laurent discussed, their sort of tapioca starch, which they were very confident was being sourced from two different suppliers, so they were secure on that.
But what we found was at the fourth tier level, they were all coming from the same geographic region in Thailand, actually. And this completely hidden from them and really left them very exposed to any sort of climate incidences that would happen and so in that instance they were able to look at this situation and improve the resilience of their supply chain by sourcing from other regions, geographic regions, so they be subject to climate impacts from that area.
Franziska Nothofer:
Thank you, Kalim. Okay, do we have any more questions from the audience? Let’s have a look. We have another one coming through. How can you target the Tier-N impact in a complex supply chain?
Kalim Khan:
The tier and impact will really I think this it’s down to sort of your organization and how you evaluate risks in in your supply chain network so Everstream as a platform will look at your network and then apply 31 different risk categories and come up with a risk score. Okay, so having a score for all of your facilities and assets in your supply chain right down to the Nth tier. And then secondly, evaluating those risks against material value. So what is the potential revenue or cost implication associated with that particular supply? Which product is inputting into what volumes, etc. and I think a combination of having up-to-date sort of risk scores plus sort of the material value associated with those suppliers then gives you the right framework for evaluating the risk around an nth tier supplier.
Laurent Charmes:
To add to that, sorry, the value I would supplement as well to, it’s always coming back to the criticality of the suppliers, of the materials, of the locations, because some suppliers may not be so big or what they provide is not so big, but you may have as well a very strong partnership, or there may be partners for innovation, or they may be more critical to your business than the others. And by filtering these down and scoring these down properly on tier one and then cascading that for the different tiers you can come up with a model as well which will help you to evaluate this and say well across all the thousands of tier N suppliers that I have which one are more important than the others and quickly impact that on the tier one and clearly have a model where you can yeah better evaluate the impact on your own organization.
Franziska Nothofer:
Wonderful thank you both I’m I’m conscious of everyone’s time and we’re slowly coming to the end of the session. If you have any additional questions about the content or would like to get in touch with our team directly, please reach out to [email protected] and we will also get back to you on any questions we couldn’t answer in this session and we’ll send out the recording within the next day. Thank you to all our attendees who joined today and thank you to our amazing presenters, Kalim and Laurent. Have a great day and with that we will close today’s session.
Laurent Charmes:
Thank you very much. Enjoy the rest of the day. Bye bye.