The Pandemic's Impact on Supply Chain Modernization
This is the English translation of an interview with 3Sat's makro that first appeared 9 February 2021.
macro: The pandemic reveals the weaknesses of extended, global supply chains, not only for the vaccine and its precursors. How do companies react to this? More warehousing, diversification of suppliers?
Julia Hartmann: Some companies have tried to increase their stocks in order to be able to deliver even during the pandemic. However, this is not a long-term strategy, because stocks tie up capital and materials become obsolete. In the long term, companies will have to make their supply chains more flexible by expanding their own production capacities.
At the same time, they will need to reduce dependencies on individual, critical suppliers and develop alternative sources of supply. I expect European buying companies to will search for alternatives in Eastern Europe. However, this is easier for components and materials that are widely available such as plastic, wood or apparel. It becomes more difficult with specialized technical products such as circuit boards or touchscreens.
macro: Will it be possible - despite high wage costs - to keep production jobs in Germany, perhaps even to bring production back? And what role do digitization and automation play in this?
Hartmann: Production is becoming more and more modern and digital - regardless of where it takes place. Therefore, the location of highly automated production facilities can now be decided much more independently of factors such as the level of wage costs than in the past. Germany could also benefit from this.
macro: What is your position on the thesis that the digitization of corporate processes makes companies more agile and resilient, and therefore better prepared for coming crises and upheavals?
Hartmann: The pandemic has made it clear that many companies are not sufficiently capable of managing their globally dispersed, complex supply chains. Here, digitization can offer solutions in many ways. For example, companies can more easily find out where the weak points in the supply chain are and develop contingency plans.
Blockchain can be used to generate real-time data on where a product is currently in the supply chain. The entire customs system could be mapped digitally. All of this makes supply chains more transparent and agile.
macro: The key to the digital future is software and algorithms. Not exactly the core competence of the German economy. Do we have to rethink fundamentally here?
Hartmann: In fact, many companies can hardly record or evaluate the amount of data that is generated in their supply chain every day. Both in the supply chain and in their own production, competencies in the areas of robotics, blockchain, 3D printing and other Industry 4.0 technologies create undreamt-of competitive advantages that German companies can use for themselves.
Carsten Meyer conducted the interview for makro.
Watch the full video here