Robust supply network: required transparency is still missing

PROF. DR. THOMAS FRIEDLI Director of the Institute of Technology Management and Professor of Production Management University of St. Gallen

THOMAS SPIESS
Member of the Executive Board
Staufen.Inova AG

Professor Friedli, what is the biggest challenge for industry and globally active companies with regard to robust supply networks?

Friedli: For years, the biggest challenge has been the question of how to make the complexity of a network so transparent that good and well-founded decisions can be made. The pandemic has not changed this. Up to now, a large part of optimizing the production areas of many companies has always been related to a single location. In the Industry 4.0 hype, this approach led to digital showcase factories, but the digitization driven in this regard offers absolutely no perspective for networks.

How does the University of St. Gallen support companies in developing such a network perspective?

Friedli: By developing models that help them create transparency. Because that is the basis for having the right discussions and making the right decisions. After all, we already see the goals slowly changing. Before the pandemic, the focus was almost exclusively on traditional ‘competitive priorities,’ such as costs, time, flexibility, quality and innovation. Now, robustness and resilience are at the top of the list.

Staufen.Inova AG has also been advising customers on supply chain network management for years. Mr. Spiess, what has changed in companies over the past five years?

Spiess: Instead of just making individual factories transparent, some customers have now started to look beyond the factory grounds. Bosch, for example, is in the process of making its own factory network transparent, with no less than 240 plants worldwide.

What do customers need to focus on in the next few years as they transform to a glass network?

Spiess: Companies have to identify major levers. You cannot just look at the company’s own networks, you have to look at the supplier network and the distribution network all the way to the end customer. And they must learn to manage these complex value networks. The pandemic turned the focus onto the topics of robustness and collaboration, as supply chains suddenly began to falter or even break down completely.

The complexity of supply networks is often only apparent when cross-site and cross-process projects are implemented. What do you recommend in such situations?

Spiess: One approach to reducing complexity is to segment and structure the network. Corporations need to look at where there are similar processes that they can treat and manage the same way. Another topic is shortening the supply chain and finding interfaces to other areas. This is where modeling can yield interesting results. And ultimately, someone in top management must manage the topic of networks.

The University of St. Gallen and Staufen.Inova, together with the Swiss Innovation Agency Innosuisse, are launching a research program on the topic of robust production networks. What is the main focus?

Friedli: We know that a network is often reduced to typical footprint decisions. When it comes to production, this can lead to relocations, reassignments or site closures. Of course, you can always produce somewhere cheaper. But there is another lever for robustness and resilience: overall coordination within the network. We want to look at why overall coordination has been poorly addressed or not addressed at all so far, and most importantly, how it can be improved. Because if a company can reach decisions there today, it can implement them tomorrow. A site closure, on the other hand, usually drags on for years

What role does Staufen.Inova play in this research program?

Spiess: Staufen.Inova forms the bridge to the practical world, i.e. between universities and companies participating in the project. We contribute an end-to-end way of thinking. My role in particular is also to recruit additional companies from our customer base and network that are interested in robust production networks as project participants.

Professor Friedli, one final question: Cost pressure and global specialization in individual steps of the value chain have become challenges for corporations and SMEs in recent years.

How can companies meet these challenges in the short and medium term?

Friedli: Many industrial companies have taken production for granted in recent years, sometimes completely losing sight of it. This has led to some serious missteps. Because operational excellence continues to play a crucial role. The motivation to also keep improving production must be maintained. And importantly, digitization must not become an end in itself. But it can help improve overall coordination and thus the robustness of their networks. Companies must not hesitate to use leverage to establish transparent supply chains.