In February, Klaus Niebur, the director of global supply chain risk management at Autoliv, and Jan Thiessen, the managing director at targetP!, spoke on best practices on supply chain risk management at ARC Advisory Group’s Digital Transformation in Industry conference.
Autoliv is the world’s largest safety system supplier in automotive industry. This global, Tier 1 manufacturer is headquartered in Stockholm and had revenues of over $8 billion last year. It supplies airbags, seatbelts, and steering wheels to most of the Automotive OEMs – companies like Renault/Nissan, Volkswagen, etc. targetP!, in turn, is a boutique procurement consultancy.
The main take aways from the presentation earlier this year were the following:
The auto industry has made supply chain risk management a priority since the Fukushima nuclear disaster in 2011. As the Automotive OEMs improved their supply chain risk management processes, they then turned to their key suppliers to improve their risk management processes. Autoliv is the largest supplier of safety systems to the automotive industry. The company works hard to meet the demanding requirements for quality, innovation, and cost from their OEM customers. Because of that, they beefed up their crisis management capabilities following Fukushima.
By the end of 2019, Autoliv realized that there were new technologies and supply chain risk management providers that could promote a competitive advantage in their risk management program. These solutions can identify suppliers with financial issues, notify a company when suppliers have regulatory violations, provide intelligence on how things like natural hazards or port delays will impact a company’s supply chain, uncover the impacts of cybersecurity or political instability on supply chains, and detect several other types of threats to a supply chain in real time.
Their implementation of a supply chain risk management solution involved changes to their processes and how what their supply chain professionals were expected to do. The supply chain team understood the need for this kind of solution and Covid provided strong reinforcement for the need for this kind of solution. Professionals from procurement, compliance, logistics, sustainability, information-security and several other internal stakeholder all use the solution for different reasons. Mr. Niebur did not say which risk management solution provider they picked, but I suspect they implemented a solution from riskmethods. The implementation of this digital risk platform was supported by targetP!, a boutique consulting firm specialized in building holistic supply chain risk approaches
Implementing the solution involved cleaning up master data and mapping their complete global supply chain. The implementation was not trivial. Risk management solutions scrape data from hundreds of thousands of online & social-media sites, but Autoliv also has access to sources of information that they pay for. They wanted these diverse sources of information pulled together in one central, user-friendly location they call their “garage.” targetP! Helped to develop and implement a comprehensive supply chain risk program that included an effective governance structure, practical contingency plans, and crisis response measures.
Autoliv’s Ongoing Journey in Supply Chain Risk Management
Mr. Niebur’s and Thiessen’s presentation was taped in November of 2021 and then played online in February. At the time we spoke, Mr. Niebur spoke of risk management as a continuous improvement journey that would never end. There were several things they were looking to accomplish in the near term. I wanted to circle back to Klaus and Jan and get caught up on their journey.
Steve: Klaus, when we talked, you mentioned Autoliv was already doing digital supplier management, had digital sourcing solutions, and was looking at real-time transportation visibility solutions to provide better predicted times of arrival for inbound and outbound shipments. In short, this risk management solution needed to integrate into your IT ecosystem. Your future vision was for risk management to be seamlessly integrated into an advanced control tower. Can you talk about how this journey is going?
Klaus: This is correct and it is still our goal to create this Control Tower. It will link all initiatives within the supply chain function and be enabled by our digital solutions and all data sources. And we are making progress.
Steve: Can you go into more detail on your vision for the control tower?
Klaus: The plan is to build a holistic “one-stop-shop” Control-Tower along all supply chain functions. This includes plant operations, inbound and outbound transportation, warehousing, demand planning and our comprehensive and running supply chain risk management ecosystem. As a first step, we’re operating a “lean” Control-Tower within our supplier relationship management system. This is our “supplier board”. This intermediate step is more related to Procurement and supply chain transparency. However, we are screening the market for technology. One thing we are looking for is a new way to create digital transparency upstream including visibility to risks from our N-Tier suppliers. This is not just important for our supply chain teams. It is also important for other stakeholders including our compliance, sustainability and even our customer management teams.
Steve: You mentioned your people were swamped and that they needed better tools to do their jobs. Can you give me a concrete example of how your risk management solution detected a threat and came to the rescue?
Klaus: I can´t give too many details for compliance reasons. But let´s imagine that a company wants to invest in a new plant, in a country that they have not previously operated in. In the beginning, this company would not know all the risks related to that plant. For example, to build that plant, the company would need to work with a construction company or companies. If we faced that situation, our risk analytics would include financial assessments of potential suppliers for this construction project. Unhealthy companies could jeopardize the ability to bring the plant live on schedule. Further, the analytics could identify construction firms that could adversely impact our reputation if we selected them.
Steve: You had engaged in extensive training but mentioned that more needed to be done. You also mentioned that the way your professionals were evaluated might need to change. Can you update me on this?
Klaus: We have invested a significant amount of time and money on internal training over the past few months. In addition, key players – such as our Divisional Risk Managers, as well as me – had an education program on risk management that lasted several months. I also ran several webinars and summits for our suppliers and our customers to help them understand how important we think our risk management program is.
Then of course, our own team needs constant training because our initiative is evolving over time. We need to make sure all the steps necessary to improve our resilience program is understood. We also want to make sure that the new features and functionality coming online will be efficiently used in daily life. Soon we will do more training. This will occur after we have finalize adjustments to our core procurement process. For example, improved resilience will require changes to the way we do supplier pre-qualification, sourcing, and our procurement segmentation strategy.
Steve: Jan, you have not said much. Any final thoughts?
Jan: I expect that 2023, and probably for years to come, life will be as challenging as it was in 2022.
Klaus: I agree. We will continue to invest in our supply chain risk management initiative to help minimize any negative impacts from unexpected risk events. We are strengthening our supply chain resilience wherever possible, and this also involves doing more work with our suppliers. We consider Digitalization as one of the key success factors in this journey. However, procurement will remain a people business; we know that there will be no success at all if we are not investing in education. That’s why we will constantly develop our people to become even more mature in the manner in which they deal with risk.
Jan: I believe the success of any modern supply chain risk management approach will be determined by how effectively we link humans and machines.
Steve: Thank you both for taking the time to discuss this.