2020/05/05

Optimal Supply Chain Management in the Crisis

Identifying risks early on

The coronavirus pandemic confronts companies with immense challenges. Despite the collapse in revenues in many industries and countries, the business viability of your own company must be secured. The supply chain plays a key role in this regard. When the tool of process mining has been used to ensure transparency along the full length of the supply chain and risks have been identified in advance, emergency plans can be developed rapidly. The Detecon consultants Christian Trost, Florian Zenke, Dominik Söhnle, and Nicolas Adoni describe the required actions.

The global economy finds itself in an unparalleled state of emergency because of the coronavirus. Even companies backed by solid finances are feeling the pressure.
Besides the burdens generally faced by all, certain business areas have been hit particularly hard and confronted with a number of problems. Delivery bottlenecks impair production, processes stall due to increased demand for certain services (for instance, IT services or HR services such as approval of sickness pay), and business processes are limited or even completely shut down. Companies are further challenged by reduced staffing levels and concerns about further infections during face-to-face contacts or the handing over of objects, situations that are especially problematic for sales, service, or mail. There is a ray of hope in that, as a rule, these difficulties do not all arise at the same time, but companies should be aware of them so that they can have a solution ready for implementation as quickly as possible if and when worse comes to worst.

The purchasing and process management departments of companies have a particular obligation in this regard and must react now. Initial measures should include creating transparency along the supply chain, locating alternative suppliers, and securing product flow within the supply chain. In addition, processability should be strengthened by reducing runtime and increasing process capacity. Moreover, it is advisable for enterprises to focus even more sharply than usual on increasing efficiency and seeking ways to exploit the potential for savings during these difficult times. It is especially important in our current situation to focus as well on automation and the intensification of digital business processes in order to expand the virtual part of work.

How can companies – now more than ever – use new digital tools to increase efficiency and optimize processes? Two approaches have proven particularly effective in Detecon’s coronavirus risk management: spend analysis to determine the default risk of critical suppliers and supply chain risk analysis with process mining. Both approaches aim at transparent presentation and optimization of holistic processes in the supply chain to strengthen the resilience of companies – in times of crisis and beyond.

Spend analysis to determine the default risk of critical suppliers

In the current crisis situation, spend analyses and process mining are effective ways to manage risks proactively and gain new insights. The concept of spend analytics enables companies to view the essential information flows of their strategic purchasing in a consolidated form depicted as a graph. It becomes  possible to obtain at any time an overview of current contracts, orders, and prices with a single click and to carry out analyses of supplier structure, contracts, or payment terms, for example. The acquired findings can be used to determine where there is potential for optimization. During the coronavirus crisis, purchasing departments can make specific use of spend analyses to identify risky suppliers and affected product groups. Currently, many providers of spend analysis tools also offer special coronavirus risk dashboards. They can be used to call up data-based assessments drawing on the ERP system. The prerequisite for the ad hoc use of spend analysis tools is their prior installation. That is lacking in many companies, however.

Detecon has developed an individual coronavirus risk management approach that even companies without an installed spend analytics platform can use to obtain an overview of their supply chain. The goal is to provide companies with a transparent overview of the default risk of their suppliers within the commodity group structure and in the shortest possible time. For example, the Detecon tool contains adaptive dashboards that break down the high-risk purchasing volume by supplier and at the same time recommend alternative sources already contained in the supplier portfolio. The tool requires no implementation or interfaces to systems and can be operated directly on the client’s premises.

The use of a “six-point approach” applied in cooperation with the client identifies critical product groups and determination of the risk of supplier default in consideration of current global developments. The results of the risk assessment can be displayed daily in a dashboard. Once this foundation has been laid, the client’s spend analysis approach is refined and risk management is established.

Supply chain risk analysis with process mining

Process mining is the bridge spanning the gap between classic business process management and data mining. The methodology extracts event log data from ERP systems, enriches them with supplementary information such as supplier master data or process information, and bundles everything into intuitive and freely configurable analysis dashboards. Both current and historical event data are integrated to identify patterns from the past and use them for the analysis of future process events.

The fully comprehensive data-based process transparency of process mining is not limited to support in the identification of bottlenecks and automation potential. It offers various opportunities, especially during the coronavirus crisis, to identify risks, to counteract them, and to minimize the effects of the crisis, with special emphasis on the company’s own supply chain.

Process mining providers such as Celonis SE recognized the potential of their technology in the context of the coronavirus pandemic at an early stage and created ready-to-implement risk monitors for supply chain analysis. Companies can utilize the monitors to filter their open orders, see what suppliers the orders have been placed with, and determine what impact the restrictions imposed because of the coronavirus will have on them.

Risk countries that are particularly hard hit can be defined either manually or by importing data from institutes such as Johns Hopkins University. The risk level of open orders as well as possible effects on delivery times and bottlenecks for separate material groups are automatically calculated using the acquired data. Supported by this level of transparency, companies can transfer orders from suppliers unable to make deliveries to those that are currently less affected.

This approach has the advantage that it can link data from different systems and databases to generate cross-system assessments. The data can be fed into the pre-configured dashboards within a short time, and they can be utilized productively. A multitude of adjustment and filter settings offer complete flexibility and the best possible analysis of specific company situations.

Opportunities through data-based supply chain analyses in times of crisis

The effects and advantages for companies that result from the use of the analysis tools described here in the current crisis are manifold. These instruments enable short-term, risk-adapted supply chain restructuring that ensures the smooth flow along supply chains, enabling companies to safeguard their production. In addition, companies can also obtain an assessment of the potential risk for purchasing and production. The transparent overview on the dashboards is the means for adjusting requirements in resources, guaranteeing the timely and efficient deployment of humans and machines. Finally, the analysis of past processes identifies relevant pain points that can be considered for long-term implementation into the supply chain.

From short-term measures to long-term resilience!

Spend analysis and the process mining tool from Celonis reveal risks in advance and provide transparency along the full length of the supply chain. Companies can more easily identify critical suppliers, an important step for the prompt development of contingency plans and a check for alternative suppliers and transport routes. They are subsequently in a position to ensure business viability and emerge stronger from the crisis.

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