Uncover your supply chain risks<\/h1>\n\n Munich, November 2022<\/span>\n <\/div>\n <\/div>\n <\/div>\n <\/div>\n \t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t\n\t\t\t\t\t\t\n\t\t\t\t\t\n\t\t\t\n\t\t\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\n\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\n \n\n\n \n \n\n A<\/span>\n \u00a0pragmatic approach to identify and assess supplier risks<\/strong><\/p>\n\n <\/div>\n\n \n\n <\/div>\n \t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\n\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\tIf the last few years have taught us anything, it is that automotive supply chain risk is real. Companies need a structured process of supplier risk identification and mitigation: This is the only way to embed end-to-end supply chain resilience for the future. <\/em><\/p>The automotive supply chain is extended, global, complex \u2013 and fragile. The list of recent and current supply chain shocks and disruptions is already long. The Covid-19 pandemic, logistics failures, political turmoil and warfare have stressed existing automotive supply arrangements to breaking point, while new technologies and new types of suppliers are concentrating risk and supply dependency. There is no reason to think this volatility and risk escalation will end any time soon. Companies need to mitigate supplier and supply chain risk, and to do so they must quantify it.<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t
\n\t\t\t\n\t\t\t\t\t\t\n\t\t\t\t\n\t\t\tInsight download and author information\n<\/h2>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\n\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\n \n \n \n\n\t Authors<\/h2> <\/div>\n \n \n \n Fritz Metzger<\/p>\n
Associate Partner<\/p>\n
fritz.metzger@berylls.com<\/p>\n <\/div>\n
\n \n <\/div>\n <\/div>\n <\/div>\n <\/a>\n <\/div>\n\n <\/div>\n \n \n Hendryk Pausch<\/p>\n
Project Manager<\/p>\n
hendryk.pausch@berylls.com<\/p>\n <\/div>\n
\n \n <\/div>\n <\/div>\n <\/div>\n <\/a>\n <\/div>\n\n <\/div>\n \n \n Eren Duygun<\/p>\n
Consultant<\/p>\n
eren.duygun@berylls.com<\/p>\n <\/div>\n
\n \n <\/div>\n <\/div>\n <\/div>\n <\/a>\n <\/div>\n\n <\/div>\n \n \n\n <\/div>\n\n <\/div>\n\n\n\n \t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t\n\t\t\t\t\t\t\n\t\t\t\t\t\n\t\t\t\n\t\t\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\tUnderstanding the new supplier landscape<\/strong><\/h2>Where industrial supply chains are longstanding and the supplier base is rich and competitive, supplier risk may be limited. But where supply needs are developing rapidly against a background of global uncertainty and technology change then risk will inevitably rise. And that is exactly the situation the automotive industry faces today.<\/p>
The shift to electric drivetrains, connected software-defined vehicles and mobility services have combined to create the greatest period of change the automotive industry has faced. Nowhere is this more visible than in the supply chain arrangements that are critical to automotive success. Change takes the form of increasing process and product complexity, rising demand for new resources and materials that in turn creates strong global inter-dependencies, and an irreversible growth in environmental awareness and demands.<\/p>
The risks to resilience created by such changes are already apparent. Shortages of both raw materials and finished goods have already caused production stoppages and lengthening delivery times. These event-driven vulnerabilities have been exacerbated by extended global logistics chains, where a break in one link of the supply chain can disrupt the entire production process.<\/p>
Meanwhile both OEMs and suppliers are struggling to meet the demands of increased product and process complexity. The skills needed to adapt to a digitized sustainability-first industrial model are in short supply, leading to a near-monopoly by some technology suppliers and increasing levels of dependency where risk can no longer be mitigated by multi-supplier strategies. As a result, analysis and mitigation of risk has never been so important.<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
\n\t\t\t\t\n\t\t\t\t\t\t\tMaking risk visible<\/strong><\/h2>Despite clear evidence that supply chain fragility is a rising risk factor, many companies have not taken action to address the threat to their competitive position. According to independent research, some 37% of automotive companies do not have formal supply chain risk monitoring procedures in place. This should be addressed as a matter of urgency.<\/p>
The Berylls risk approach allows companies to create a holistic yet pragmatic assessment of total supply chain risk. The approach includes a component- and process-related risk assessment, together with an event-driven quantification of political and logistical risks, including the risk of natural disasters, or political crisis.<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
\n\t\t\t\t\n\t\t\t\t\t\n\t\t\t\n\t\t\t\t\t\t<\/span>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\tFigure 1: Where is the risk?<\/strong><\/h5>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\n\t\t\t\t\t\t\t![\"\"](\"https:\/\/www.berylls.com\/wp-content\/uploads\/2022\/11\/Folie4.jpg\")
\t\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\n\t\t\t\n\t\t\t\t\t\t<\/span>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\tIn a complex supply chain, identifying critical suppliers represents a heavy workload. For many companies, supplier or risk management functions simply do not have the resources to perform detailed or sophisticated analyses of the total supply chain. So instead of trying to \u2018boil the ocean\u2019 at a stroke, companies should adopt a targeted and pragmatic approach to risk identification and mitigation.<\/p>
The approach starts with a six-step Q&A process. By answering this simple set of yes\/no questions an initial set of critical suppliers is identified, which can then be analyzed in greater detail to generate supplier risk rankings and precise mitigation measures.<\/p>
Step one:<\/strong> Filter for critical suppliers by component \/ process criteria. This filter determines criticality according to characteristics of components, the supplier market, and the supplier\u2019s value creation process.<\/p>\u00a0<\/p>
- Ask: does the supplier provide a component that cannot be sourced through a different supplier on short notice of four weeks or less?<\/li>
- Ask: has the supplier only recently entered the automotive segment?<\/li>
- Ask: is the supplier\u2019s value creation process dependent on volatile parameters that are beyond its control?<\/li><\/ul>
\u00a0<\/p>
Step two<\/strong>: Filter for critical suppliers by event-driven factors. This step determines criticality according to the buyer-supplier relationship, political factors, the logistics chain, and potential catastrophic risks.<\/p>\u00a0<\/p>
- Ask: is the supplier\u2019s activity and supply to us significantly affected by political influence?<\/li>
- Ask: is the logistics chain volatile or hard to control?<\/li>
- Ask: are the supplier\u2019s activities exposed to regions that are prone to natural disasters or war?<\/li><\/ul>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\n\t\t\t\n\t\t\t\t\t\t<\/span>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\t
Figure 2: Rank suppliers by criticality<\/strong><\/h5>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\n\t\t\t\t\t\t\t![\"\"](\"https:\/\/www.berylls.com\/wp-content\/uploads\/2022\/11\/Folie5.jpg\")
\t\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\n\t\t\t\n\t\t\t\t\t\t<\/span>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\t\t\tThe result of the initial six-step review may be that many suppliers qualify as critical. Companies should then consider their own appetite for risk and raise the threshold for criticality accordingly, by assigning critical status only to those suppliers that generate multiple \u2018yes\u2019 answers in the initial review, or by assigning scores to selected answers.<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
\n\t\t\t\t\n\t\t\t\t\t\t\tFrom risk to mitigation<\/strong><\/h2>The six-element process determines supplier criticality, but determining actual risk demands more detailed analysis. Therefore, a series of further indicators are used to determine the level of supply chain risk for specific suppliers, which can then be ranked according to the need for mitigation. These include product and supplier indicators such as component characteristics, raw material scarcity, number and maturity of suppliers in the market, and supplier performance including cybersecurity performance. They also include market indicators such as technology complexity, costs and competition. Event-driven indicators include regulatory change, political pressures and infrastructure dependence, logistics performance and cost structure, as well as vulnerability to extreme events.
<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
\u00a0pragmatic approach to identify and assess supplier risks<\/strong><\/p>\n\n <\/div>\n\n \n\n <\/div>\n \t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t If the last few years have taught us anything, it is that automotive supply chain risk is real. Companies need a structured process of supplier risk identification and mitigation: This is the only way to embed end-to-end supply chain resilience for the future. <\/em><\/p> The automotive supply chain is extended, global, complex \u2013 and fragile. The list of recent and current supply chain shocks and disruptions is already long. The Covid-19 pandemic, logistics failures, political turmoil and warfare have stressed existing automotive supply arrangements to breaking point, while new technologies and new types of suppliers are concentrating risk and supply dependency. There is no reason to think this volatility and risk escalation will end any time soon. Companies need to mitigate supplier and supply chain risk, and to do so they must quantify it.<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t Fritz Metzger<\/p>\n Associate Partner<\/p>\n fritz.metzger@berylls.com<\/p>\n <\/div>\n Hendryk Pausch<\/p>\n Project Manager<\/p>\n hendryk.pausch@berylls.com<\/p>\n <\/div>\n Eren Duygun<\/p>\n Consultant<\/p>\n eren.duygun@berylls.com<\/p>\n <\/div>\n Where industrial supply chains are longstanding and the supplier base is rich and competitive, supplier risk may be limited. But where supply needs are developing rapidly against a background of global uncertainty and technology change then risk will inevitably rise. And that is exactly the situation the automotive industry faces today.<\/p> The shift to electric drivetrains, connected software-defined vehicles and mobility services have combined to create the greatest period of change the automotive industry has faced. Nowhere is this more visible than in the supply chain arrangements that are critical to automotive success. Change takes the form of increasing process and product complexity, rising demand for new resources and materials that in turn creates strong global inter-dependencies, and an irreversible growth in environmental awareness and demands.<\/p> The risks to resilience created by such changes are already apparent. Shortages of both raw materials and finished goods have already caused production stoppages and lengthening delivery times. These event-driven vulnerabilities have been exacerbated by extended global logistics chains, where a break in one link of the supply chain can disrupt the entire production process.<\/p> Meanwhile both OEMs and suppliers are struggling to meet the demands of increased product and process complexity. The skills needed to adapt to a digitized sustainability-first industrial model are in short supply, leading to a near-monopoly by some technology suppliers and increasing levels of dependency where risk can no longer be mitigated by multi-supplier strategies. As a result, analysis and mitigation of risk has never been so important.<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t Despite clear evidence that supply chain fragility is a rising risk factor, many companies have not taken action to address the threat to their competitive position. According to independent research, some 37% of automotive companies do not have formal supply chain risk monitoring procedures in place. This should be addressed as a matter of urgency.<\/p> The Berylls risk approach allows companies to create a holistic yet pragmatic assessment of total supply chain risk. The approach includes a component- and process-related risk assessment, together with an event-driven quantification of political and logistical risks, including the risk of natural disasters, or political crisis.<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t In a complex supply chain, identifying critical suppliers represents a heavy workload. For many companies, supplier or risk management functions simply do not have the resources to perform detailed or sophisticated analyses of the total supply chain. So instead of trying to \u2018boil the ocean\u2019 at a stroke, companies should adopt a targeted and pragmatic approach to risk identification and mitigation.<\/p> The approach starts with a six-step Q&A process. By answering this simple set of yes\/no questions an initial set of critical suppliers is identified, which can then be analyzed in greater detail to generate supplier risk rankings and precise mitigation measures.<\/p> Step one:<\/strong> Filter for critical suppliers by component \/ process criteria. This filter determines criticality according to characteristics of components, the supplier market, and the supplier\u2019s value creation process.<\/p> \u00a0<\/p> \u00a0<\/p> Step two<\/strong>: Filter for critical suppliers by event-driven factors. This step determines criticality according to the buyer-supplier relationship, political factors, the logistics chain, and potential catastrophic risks.<\/p> \u00a0<\/p> The result of the initial six-step review may be that many suppliers qualify as critical. Companies should then consider their own appetite for risk and raise the threshold for criticality accordingly, by assigning critical status only to those suppliers that generate multiple \u2018yes\u2019 answers in the initial review, or by assigning scores to selected answers.<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t The six-element process determines supplier criticality, but determining actual risk demands more detailed analysis. Therefore, a series of further indicators are used to determine the level of supply chain risk for specific suppliers, which can then be ranked according to the need for mitigation. These include product and supplier indicators such as component characteristics, raw material scarcity, number and maturity of suppliers in the market, and supplier performance including cybersecurity performance. They also include market indicators such as technology complexity, costs and competition. Event-driven indicators include regulatory change, political pressures and infrastructure dependence, logistics performance and cost structure, as well as vulnerability to extreme events. Insight download and author information\n<\/h2>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
Authors<\/h2> <\/div>\n \n
Understanding the new supplier landscape<\/strong><\/h2>
Making risk visible<\/strong><\/h2>
Figure 1: Where is the risk?<\/strong><\/h5>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
\t\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\tFigure 2: Rank suppliers by criticality<\/strong><\/h5>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
\t\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\tFrom risk to mitigation<\/strong><\/h2>
<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
![\"\"](\"https:\/\/www.berylls.com\/wp-content\/uploads\/2022\/11\/Folie6.jpg\")
\t\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t![](\"https:\/\/www.berylls.com\/wp-content\/uploads\/2022\/06\/Metzger-Fritz.png\")
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