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Keeping the supply chain afloat

UECC invests in dual fuel
LNG car carriers European short-sea
operator UECC has ordered
two pure car and truck
carriers…

Keeping the supply chain afloat
20 February 2014 | Mark Morley

As extreme weather continues to disrupt production,
Mark Morley (left) writes that manufacturers need to take
a closer look at how they are protecting their supply
chains both physically and digitally.

Gefco provides valueadded services for
Citroën - Gefco is providing
value-added vehicle
services for Citroën
Berlingo…

The current flooding crisis gripping much of the UK highlights how
vulnerable global supply chain and transport networks are to
disruption.

Korea demands drastic
tariff cuts from India South Korea has asked the
government of India to
undertake major tariff cuts
on…

Globalisation has helped to fuel trade, consumption and economic
growth, but also means events such as natural disasters and extreme
weather have even more widespread economic consequences, including for the automotive
supply chain. As if the rain and winds weren't enough, snow and extreme cold have even been
disrupting car production in unexpected places, including the US south and Japan.

UK auto industry
receives £45m funding
boost - UK Business
Secretary Vince Cable
announced the
implementation of…

Looking out further, the risks go beyond the
operational into the digital space as well, where so
much supply chain information is exchanged.

ACS reports auto
contracts helping charter
increase - Aircraft charter
provider, Air Charter
Service, has reported a
22% year-on-year…

Research conducted by Accenture showed significant
continuity issues can cut the share price of a company
affected by supply chain disruption by 7% on average.
Alongside the increasing impact of natural disasters in
recent years, the past 24 months has seen a
substantial shift in the main causes of disruption, with
extreme weather now the second most common cause.
This demonstrates the need for supply chain directors
to shift their focus from reactive to proactive risk
management.
In light of these devastating consequences, it is in each
country’s interest to ensure that they are prepared
when disaster strikes. Increasing supply chain
resilience was one of the key themes at last year’s
World Economic Forum, and building this should be on
every CEO’s agenda, especially if they operate a truly
global supply chain.
But what exactly is resilience? The Accenture report

A recent history of
disaster
Recent examples of extreme weather
and natural disasters disrupting
supply chains include:
UK floods (2013-2014) – The
highest rainfall levels since 1910
have led to prolonged flooding
across the country. Businesses have
been severely impacted, and there
has been substantial disruption to
road and rail infrastructure. Some
analysts have predicted costs of
more than £1 billion ($1.66 billion) to
the UK economy.
European floods (2013) –
Significant rainfall in Eastern Europe
had a major impact on manufacturing
companies last year. Porsche was
forced to temporarily close its factory

more news

Live Updates
Bryan
Burkhardt
speaking at
FVL North
America
Conference 2014
Gerry
Mattios
speaking at
China
Conference 2014
Andrea Eck
speaking at
Europe
Conference
2014
defines it as “the ability of a system to return to its
original or desired state after being disturbed.”
Consequently, with resilience now a top priority for
supply chain directors, various operational based
changes have been implemented to try and remove the
potential for risk. Examples include:

in Germany after floods in the Czech
Republic halted the supply of
Cayenne bodies by rail from the
Volkswagen plant where they are built
in Bratislava, Slovakia.

Near shoring – also referred to as ‘reverse

Superstorm Sandy (2012) – This
storm was the deadliest to hit the
north-eastern coast of the United

globalisation’, the term is used to describe a way of
shortening logistics networks. Rises in wages in China
and an increase in natural disasters have led many
companies to consider relocating manufacturing

States, causing over $68 billion in
damage to buildings and
infrastructure, including ports and rail
lines. It prompted the worst fuel

capacity back to their home market. For example,
Caterpillar moved production of its small bobcat
excavator from Japan back to North America.

shortages in North America since the
1970s.

Establish a global plant floor – this is a term coined
by the analyst firm IDC, and describes how
manufacturers are spreading production capacity to
differing plants around the world. Therefore, if disaster
strikes again and a manufacturing plant is taken offline,
they can switch to an alternative to maintain production
capacity. For automotive, this is also referred to as ‘colocation’ of production for vehicle models.

Japanese tsunami (2011) – The
tsunami brought long-term disruption
to global supply chains, particularly in
automotive, with production at many
factories suspended as a result of
flooding.

Dual sourcing strategies – constant disruption
combined with a need to source from the Far East has
meant many companies now implement dual sourcing
strategies. This means that when disruption occurs
across a supply chain, the manufacturing company can
quickly switch to an alternative provider of components.
Concerns also remain in relation to oil dependencies
and increasing insurance and trade finance costs. This
added to the impacts of natural disasters means more
than 80% of companies are now worried about supply
chain resilience. Subsequently, risk management must
be an explicit but integral part of supply chain
governance. Accenture’s own recommendations
include establishing a multi-stakeholder supply chain
risk assessment process, the creation of global
resilience standards and expanding the use of data

Thailand Floods (2011) – Hi-tech
supply and automotive supply chains
were severely impacted by the floods
in Thailand, which led to a shortage
of key components within the
computer industry. Over 1,000
factories were affected and
subsequent insurance claims
reached $20 billion.

sharing platforms for risk identification and responses.
Digital resilience
So far I have only covered risk management across the physical supply chain. As more traditional
supply chains evolve into the digital market however, effective risk management will also need to
include these areas. As information is increasingly transmitted digitally, there is also a greater
chance of cyber risks disrupting supply chains.
Therefore, in addition to introducing operational-based changes, supply chain directors should
likewise look to improve their information and communication technology (ICT) infrastructures. If
configured correctly, such technology would provide significant resilience gains, according to
Accenture.

Featured
Interview
Read more ›

Join
AUTOMOTIVE LOGISTICS
FINISHED VEHICLE
LOGISTICS
PACKAGING
SERVICE PARTS
The corner stone of IT-based resilience is data and information sharing. Business continuity is
enabled through access to real time data, followed by rapid dissemination of data-driven supply
chain fixes. However, information-sharing infrastructures depend on a resilient core network,
appropriate communication tools and an element of redundancy.
Combined, this requires an ICT infrastructure that is flexible, scalable, secure and re-routable.
Mark Morley is director of industry marketing for manufacturing at GXS.

2

Related Stories

29 January 2014
DHL launches new risk
management solution

12 January 2011
Global risks for the
supply chain

01 January 2010
Tax efficiency w ithin the
automotive supply chain

01 April 2011
The business case for
outsourcing supply
chain management

01 July 2013
IT updates: three OEMs
join forces to map
supply chain

Tagged w ith: Inbound, IT, SCM

Staff | Site Map
© Ultima Media. All rights reserved. Selected re-use of editorial content from this site is permitted conditional on attribution and a link.
Contact us about licensing.

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Automotive Logistics - Keeping the Supply Chain Afloat

  • 1. Search Website Advanced Search Ho me News & In tellig en ce Mag az in es Even ts Bu yers’ Gu id e About Us REGISTER ...to receive print magazine, free to selected readers Home › Opinion › News Keeping the supply chain afloat UECC invests in dual fuel LNG car carriers European short-sea operator UECC has ordered two pure car and truck carriers… Keeping the supply chain afloat 20 February 2014 | Mark Morley As extreme weather continues to disrupt production, Mark Morley (left) writes that manufacturers need to take a closer look at how they are protecting their supply chains both physically and digitally. Gefco provides valueadded services for Citroën - Gefco is providing value-added vehicle services for Citroën Berlingo… The current flooding crisis gripping much of the UK highlights how vulnerable global supply chain and transport networks are to disruption. Korea demands drastic tariff cuts from India South Korea has asked the government of India to undertake major tariff cuts on… Globalisation has helped to fuel trade, consumption and economic growth, but also means events such as natural disasters and extreme weather have even more widespread economic consequences, including for the automotive supply chain. As if the rain and winds weren't enough, snow and extreme cold have even been disrupting car production in unexpected places, including the US south and Japan. UK auto industry receives £45m funding boost - UK Business Secretary Vince Cable announced the implementation of… Looking out further, the risks go beyond the operational into the digital space as well, where so much supply chain information is exchanged. ACS reports auto contracts helping charter increase - Aircraft charter provider, Air Charter Service, has reported a 22% year-on-year… Research conducted by Accenture showed significant continuity issues can cut the share price of a company affected by supply chain disruption by 7% on average. Alongside the increasing impact of natural disasters in recent years, the past 24 months has seen a substantial shift in the main causes of disruption, with extreme weather now the second most common cause. This demonstrates the need for supply chain directors to shift their focus from reactive to proactive risk management. In light of these devastating consequences, it is in each country’s interest to ensure that they are prepared when disaster strikes. Increasing supply chain resilience was one of the key themes at last year’s World Economic Forum, and building this should be on every CEO’s agenda, especially if they operate a truly global supply chain. But what exactly is resilience? The Accenture report A recent history of disaster Recent examples of extreme weather and natural disasters disrupting supply chains include: UK floods (2013-2014) – The highest rainfall levels since 1910 have led to prolonged flooding across the country. Businesses have been severely impacted, and there has been substantial disruption to road and rail infrastructure. Some analysts have predicted costs of more than £1 billion ($1.66 billion) to the UK economy. European floods (2013) – Significant rainfall in Eastern Europe had a major impact on manufacturing companies last year. Porsche was forced to temporarily close its factory more news Live Updates Bryan Burkhardt speaking at FVL North America Conference 2014 Gerry Mattios speaking at China Conference 2014 Andrea Eck speaking at Europe Conference 2014
  • 2. defines it as “the ability of a system to return to its original or desired state after being disturbed.” Consequently, with resilience now a top priority for supply chain directors, various operational based changes have been implemented to try and remove the potential for risk. Examples include: in Germany after floods in the Czech Republic halted the supply of Cayenne bodies by rail from the Volkswagen plant where they are built in Bratislava, Slovakia. Near shoring – also referred to as ‘reverse Superstorm Sandy (2012) – This storm was the deadliest to hit the north-eastern coast of the United globalisation’, the term is used to describe a way of shortening logistics networks. Rises in wages in China and an increase in natural disasters have led many companies to consider relocating manufacturing States, causing over $68 billion in damage to buildings and infrastructure, including ports and rail lines. It prompted the worst fuel capacity back to their home market. For example, Caterpillar moved production of its small bobcat excavator from Japan back to North America. shortages in North America since the 1970s. Establish a global plant floor – this is a term coined by the analyst firm IDC, and describes how manufacturers are spreading production capacity to differing plants around the world. Therefore, if disaster strikes again and a manufacturing plant is taken offline, they can switch to an alternative to maintain production capacity. For automotive, this is also referred to as ‘colocation’ of production for vehicle models. Japanese tsunami (2011) – The tsunami brought long-term disruption to global supply chains, particularly in automotive, with production at many factories suspended as a result of flooding. Dual sourcing strategies – constant disruption combined with a need to source from the Far East has meant many companies now implement dual sourcing strategies. This means that when disruption occurs across a supply chain, the manufacturing company can quickly switch to an alternative provider of components. Concerns also remain in relation to oil dependencies and increasing insurance and trade finance costs. This added to the impacts of natural disasters means more than 80% of companies are now worried about supply chain resilience. Subsequently, risk management must be an explicit but integral part of supply chain governance. Accenture’s own recommendations include establishing a multi-stakeholder supply chain risk assessment process, the creation of global resilience standards and expanding the use of data Thailand Floods (2011) – Hi-tech supply and automotive supply chains were severely impacted by the floods in Thailand, which led to a shortage of key components within the computer industry. Over 1,000 factories were affected and subsequent insurance claims reached $20 billion. sharing platforms for risk identification and responses. Digital resilience So far I have only covered risk management across the physical supply chain. As more traditional supply chains evolve into the digital market however, effective risk management will also need to include these areas. As information is increasingly transmitted digitally, there is also a greater chance of cyber risks disrupting supply chains. Therefore, in addition to introducing operational-based changes, supply chain directors should likewise look to improve their information and communication technology (ICT) infrastructures. If configured correctly, such technology would provide significant resilience gains, according to Accenture. Featured Interview Read more › Join AUTOMOTIVE LOGISTICS FINISHED VEHICLE LOGISTICS PACKAGING SERVICE PARTS
  • 3. The corner stone of IT-based resilience is data and information sharing. Business continuity is enabled through access to real time data, followed by rapid dissemination of data-driven supply chain fixes. However, information-sharing infrastructures depend on a resilient core network, appropriate communication tools and an element of redundancy. Combined, this requires an ICT infrastructure that is flexible, scalable, secure and re-routable. Mark Morley is director of industry marketing for manufacturing at GXS. 2 Related Stories 29 January 2014 DHL launches new risk management solution 12 January 2011 Global risks for the supply chain 01 January 2010 Tax efficiency w ithin the automotive supply chain 01 April 2011 The business case for outsourcing supply chain management 01 July 2013 IT updates: three OEMs join forces to map supply chain Tagged w ith: Inbound, IT, SCM Staff | Site Map © Ultima Media. All rights reserved. Selected re-use of editorial content from this site is permitted conditional on attribution and a link. Contact us about licensing.