How to achieve agile and efficient supply chains

It is going to be increasingly complex for industry and companies to manage supplies, which is why it is essential to adapt to the new global environment.

How to achieve agile and efficient supply chains

Contexts of uncertainty and constant change such as the current one require agile and efficient supply chains prepared to face the most demanding unforeseen events and demands. Only in this way can the most appropriate decisions be made at all times, in order to continue operating, avoid breaks in stockmeet service levels, ensure supply and protect revenue.

A large majority of supply chains, even the most “sophisticated”, maintain a similar approach. Strive for predict the future with the greatest accuracy and, from there, they optimize that forecast within the context they face. But, today, the world is unpredictable and disruptions and unforeseen events cannot be planned for. We therefore need a new paradigm of supply chainwhich makes it easier for corporations to take on the complexities successfully.

Let’s explain it with an example: the modern GPSfacing maps of old road. It is not enough to know where to go (the plan), nor to choose the shortest or fastest route on the map, depending on our needs. What is important is to constantly collect information on the state of traffic and the roads and, if necessary, to be able to change the route in real time and thus be able to avoid any unforeseen event.

One might think that to achieve this, it is enough to automate the process based on the possibilities offered by digital technology. However, automation by itself will not provide the supply chain with the flexibility to anticipate changes and deal with unforeseen situations. It can happen, in fact, that it offers us an optimized solution to a problem that no longer exists.

Automation by itself will not provide the supply chain with the flexibility to anticipate change

It is about highlighting, in this sense, that companies must add to that technology two fundamental capabilities and that they will be even more in the coming years. On the one hand, the ability to monitor the current state of the supply chain and anticipate possible disruptions in the short term and, on the other, to be able to make decisions and act based on unforeseen events or changes that occur.

These two potentialities must be deployed in turn in three essential components. First, to have a platform that evaluates and detects internal and external signals from end to end of the network in real time (with all the data that is collected throughout the process) and anticipates disruptions in the supply chain. The second piece is a tool based on artificial intelligence (AI) and real-time simulations, which proposes appropriate corrective actions according to the analysis of scenarios and risks.

Third, it is essential to have an agile and collaborative operational methodology, that involves both human teams and physical resources, to ensure decision-making at the right time and with the necessary information.

Recognizing all these potentialities will lead organizations to radically change the way they look at and assess the suitability of the supply chain in question. In this way, instead of focusing, as they have been doing up to now, on reducing costs and automating operations, it will be critical to identify the blind spots and blind spots that prevent deviations or obstacles from being identified in time. and overcome the rigidities that prevent the supply chain from responding to the unforeseen.

The adoption of this new paradigm It will allow organizations to build versatile and flexible supply chains capable of facing new challenges. Constant monitoring, but above all the early and rapid identification of possible problems, is a guarantee of success in these changing contexts.

In the coming years everything points to supply chains will become even more networked, which will provide greater external coordination to the strategic assets of the organizations.

There will be two trends that will mark the evolution of supply chain. The first will be that as digital advances are consolidated, operating costs will continue to be reduced and it will be more efficient to obtain solutions from outside and not from within the company. And second, it will be more difficult for organizations to maintain the best internal supply chain competencies in a number of emerging technologies such as the IoT or the most sophisticated AI algorithms.

It is clear that building a supply chain ready to face today’s world is not an easy task, but it can be done and, moreover, it is essential. Better start now.

*** Álvaro García Lombardero is a partner at Kearney.

The ‘bottlenecks’ will cut registrations by up to 25% in 2022 compared to the pre-pandemic level

If the supply crisis continues throughout the year, car sales will not reach one million, according to BBVA Research.

Volkswagen car factory in Navarra, with paralyzed vehicles waiting for chips.

The Covid-19 crisis has brought an unexpected companion that is doing a lot of damage to the automotive sector. The registrations of passenger cars in Spain have been suffering for months supply crisis and according BBVA Research This situation could lead to sales in 2022 only reaching the 940,000 units, which represents a 25% cut compared to pre-pandemic records. A news that, by the way, is not at all rosy for the banking sector, which, apart from this circumstance, is already going to face a 2022 full of uncertainty.

More specifically, the entity’s economists estimate that in 2022 they could enroll a million cars, which would mean 21% less than in 2019, when 1.26 million registrations were reached. Of course, in the event that the bottleneck in supplies are extended throughout the coming year, sales would remain at 940,000 units, that is, it would be recorded a 25% decrease compared to before the pandemic.

This after in 2021 this circumstance has caused a cut of between three and seven percentage points in registrations in Spain, which is equivalent to between 25,000 and 60,000 units of difference.

Thus, BBVA Research’s forecast for next year is that registrations will increase -despite the rise in prices due to the increase in the registration tax– above the 851,000 of 2020 and between 845,000 and 855,000 that are estimated for the end of the current year. That is if the supply problems are settled in the first semester; if not, sales will be lower.

And it is that the supply crisis is assuming a real brake on the sale of vehicles. In November, the fall in the sale of cars was 12.3% compared to the same month last year, which came after the fall in October reached 20%, becoming the worst record in thirty years.

hit for the bank

As EL ESPAÑOL-Invertia anticipated a few weeks ago, this supply crisis and its consequent impact on vehicle registrations is going to have negative repercussions for the banking sector, specifically for banks and finance companies, which have in the financing of vehicle consumption a very profitable business. If the sale of cars fell by 20% in October, in some banks the financing of these goods did around 10%breaking a clear upward trend in the segment if the impact of the pandemic is excluded.

In the sector they take this downturn very seriously, which, as sources in the sector acknowledged, is here to stay, because will last at least until the middle of next year. One more stone in the path of banking, which is already facing a 2022 full of uncertainty due to the possible rebound in delinquencies that will come with the end of those known as ICO creditswhich could rise to 6.5%.

A woman tests a car before buying it at a dealership.

A woman tests a car before buying it at a dealership.

However, the supply crisis is not the only reason that explains the fall in registrations. BBVA economists consider that the bottleneck are the explanation for much of the decline on the supply side, but demand has also played a role and, specifically, the drop in household disposable income and the rise in fuel prices.

Looking ahead to 2022, BBVA Research expects registrations to advance with the end of the escalation in fuel prices -they expect it to drop by 8% in 2022- and with the growth in household income this year and next ( although below the pre-crisis level and after the uninterrupted falls it has experienced since the third quarter of 2020).

Consumption will grow, but less

From the BBVA studies service they believe that consumption will grow next year between 5.5% and 6.5%, despite which will not be able to recover the pre-pandemic level.

And it is that, as this newspaper reported a few days ago, despite its positive trend, consumption faces two possible brakes: the supply crisis and the high price of energy, both electricity and fuel, which are going to discourage consumer spending.

Two obstacles that will prevent the “forced savings” -as he called Bank of Spain accumulated by households during confinement and health restrictions on leisure – is released in the form of consumption at the rate that was trusted a few months ago.

As pointed out from CaixaBank Research A few days ago, in 2021 not even half of this “forced saving” has been translated into consumption, so there is room for it to take center stage in 2022. Whether it will be channeled towards the purchase of vehicles is something that will be seen over time, although, at least for now, the wind is blowing against this objective.