Global supply chain disruptions have been on the rise for years. Prior to the Covid-19 pandemic in 2019, these were primarily caused by supplier issues or natural events such as weather, volcanic eruptions, or earthquakes. Since then, the nature of supply chain disruptions has changed drastically. We outline what these are and how they might be resolved below. 

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Table of Contents

1. The causes of supply chain bottlenecks are diverse
2. Supply chain resilience is suffering
3. Supply chain management is gaining importance
4. Getting started with supply chain digitalization
5. Opportunities of digitalization for logistics
6. Tips for digitalizing your logistics

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The causes of supply chain bottlenecks are diverse

Global, market-political, and societal crises and disruptions—such as Covid-19, lockdowns, trade conflicts, wars, as well as shortages of raw materials, chips, and labor—are now the dominant factors. With the ongoing conflict in Ukraine, rising energy costs have added further pressure, which is hitting manufacturing companies particularly hard.

Almost all companies, whether in production or retail, are currently suffering massively from supply chain problems, with sometimes dramatic consequences for availability and costs. The semiconductor industry is a prime example: there are chips that cost 14 EUR per unit before the Covid-19 pandemic—today, they cost 10 times that on the spot market, and in exceptional cases, up to 100 times as much. 

There is no relief in sight, as the extreme concentration of manufacturing in Taiwan (approximately 80%) allows for very little flexibility. 

We do not want to be pessimistic, but this trend toward global supply chain disruptions is real and will continue to put us under pressure today and in the future. The increasing momentum and severity of global supply problems suggest that there will be no quick end to this development. On the contrary: globalization, the division of labor, and interconnectedness have created such complex dependencies that every crisis anywhere in the world immediately ripples through all supply networks as a disruption.

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Supply chain resilience is suffering

We are facing the greatest upheaval in supply networks in decades. Specifically, several trends in logistics and global supply chain management can be identified:

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• increasing supply shortages and declining resilience in global supply chains
• geopolitical regionalization in procurement (re-sourcing strategies)
• transition from delivery logistics to supply collaboration and supply chain management
• digitalization and transparency as game changers in supply chains
• shortage of qualified skilled personnel, operational (e.g., drivers) and administrative (e.g., material planners, data analysts) 
• increasing cost pressure, rising inflation, and the risk of recession

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Regardless of how severely a company is currently affected, all firms face the same challenges: securing the supply of materials and goods and improving logistical procedures and processes. 

Logistics, supply security, and supply chain management are finally stepping out of the shadows. They are evolving from mere support functions into a new core competency for businesses. 

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Supply chain management is gaining importance

Managing supply chains is becoming a key competency in these times – or rather, it must become one. What defines this competency and future supply chain resilience? 

• continuous monitoring of the supply chain for vulnerabilities
• reviewing sourcing strategies (single, double, local), including potential relocations
• re-evaluating suppliers with a focus on their willingness to collaborate
• cross-organizational and cross-company process and technology optimization
• improved collaboration with business partners, including data integration
• agreements with suppliers regarding flexibility and cross-company cooperation
• rolling forecast and capacity planning between customers and suppliers
• transparency and monitoring of suppliers and supply chains
• digitization of cross-company business processes

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But what is the actual state of digital transformation? 

While everyone is talking about digitization, many businesses—especially small and medium-sized enterprises—are still lagging behind. To remain competitive in the long term, more dedicated initiatives are needed.

The importance of digital processes and business models was recently highlighted by the COVID-19 pandemic. Many industries had been doing exceptionally well for years. With full order books, there was a lack of pressure to change and no perceived need for rapid digital transformation. Digitization was often viewed more as an experimental playground for the "young and restless" rather than a strategic vehicle for the future. Furthermore, for decision-makers, investments in digitization often represent an expensive risk with an uncertain outcome. 

As a result, Germany only ranks in the middle of the pack in the EU regarding the integration of IT into business processes, placing 18th out of 28 EU countries according to the "Digital Economy and Society Index." The main reason for this comparatively low level of digitization is a reluctance to invest. Germany lags significantly behind countries like the USA, France, and the United Kingdom in IT investment. Is there still a lack of fundamental conviction that digitization makes business processes better and more efficient?

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Starting with supply chain digitization

Whether it's smart products, automated processes, or digital business models, no company can afford to ignore technological development. Yet, for many executive suites, digitization is still not at the top of the agenda. Amidst constant task forces and crisis-mode operations, boards, managing directors, and leaders in procurement, production, quality, and logistics no longer have the time to systematically think through strategic digital challenges and get started in a pragmatic way.

Yet it is all quite logical: according to a recently published study by the University of Trier, companies that use digitization to achieve concrete goals—such as higher growth, better performance, or cost advantages—have a higher level of digitization. Or, conversely, firms with a higher level of digitization rate their profitability and revenue growth more highly than less digitized companies.

The crucial question for digitization is therefore: How do I differentiate myself from the competition? What will be necessary in the future, and how will I continue to be successful as a company? Through low costs, highest quality, innovative products, excellent processes, and/or superior service?

As recessionary and cost pressures mount, reengineering, cost-cutting, and lean programs focusing on process costs and performance will certainly be launched with renewed intensity. Use this opportunity to implement smart digitization projects as the key to transparency, lower process costs, and improved or innovative new business processes!

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Opportunities of digitalization for logistics

But do projects always have to be expensive and risky? And where do the real needs and opportunities lie? The magic formula for smart digitalization is: 

All these criteria apply to logistics and supply chain management, because for all the talk about digitalization, logistics, supply chains, and partner management in particular are still suffering from rather analog challenges within companies! Unfortunately, the role of logistics in companies has historically been underestimated and undervalued. Logistics was often relegated to the end of the information chain (famously dismissed as "box pushers") while being at the start of supply problems, which led to costly friction and frustration in day-to-day operations.

However, due to global developments, logistics processes and collaboration with partners are increasingly becoming the focus of necessary strategic improvements. In the future, working with partners will require a fundamentally different approach to customer relations and collaboration, establishing a completely new mindset and cross-functional work processes. Move out of the silo and into collaboration – both intra-company and inter-company. 

Better collaboration (between departments and companies) in the supply chain will significantly improve business results. If you are looking for ideas to boost your innovation, you should work with start-ups like TradeLink!

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Tips for digitizing your logistics

Digitalization is a broad field – and even when its importance becomes obvious, it is not always easy to know where to start. Which processes are actually suitable for digitalization, and how extensive, complex, expensive, and risky should the change be? We have put together some tips to help you take the first step. 

1. Emails: Start your search by looking at your many Excel spreadsheets or, even better, your many emails. Yes, emails were once a great invention, but emails are not digitalization! Unless they are sensibly integrated into digital workflows, emails are merely an electronic version of manual or verbal coordination. They do not reduce administrative effort; they often increase it due to subsequent questions, follow-ups, and clarifications – often with a growing list of people in the CC field. We all know these email tsunamis that block capacity and fray nerves. Put an end to it!

2. KISS: Keep it smart & simple, or: start with the simple things. This doesn't mean massive IT flagship projects and rollouts that often spiral out of control in terms of time and cost, and whose risks every decision-maker fears. It means digitizing daily work processes through agile, manageable, low-risk "speedboat" projects with simple solutions and quick wins. So-called low-hanging fruit and quick wins are always very welcome in any company.

3. PFE: Avoid over-engineering and use simple apps and standards wherever possible. The frequently encountered "not invented here" (NIH) syndrome is a thing of the past; "proudly found elsewhere" (PFE) is the future. We are talking about ready-to-use, smart digital tools. There is a new era of software, and the best solutions are simple, intuitive, and uncomplicated – and they are valued and adopted by users.

4. 80/20 Rule: Segment your processes. Distinguish between the usual 80 to 90% standard routine operations and the 10 to 20% of exceptions or special processes that require clarification. Leave the repetitive standard tasks to the software – it is enough for humans to monitor and approve the results. But use the resources and skills of your employees for the important deviations and clarifications.

5. E2E: When adopting a new end-to-end process mindset, always start at the end of your processes. Work backward from the process result and gradually review and improve the preceding steps. In logistics, the "outside-in" principle is ideal, for example, by starting with the coordination process with partners. This coordination is often still very opaque and manual, involving emails, phone calls, lots of paper, and high effort. So, start with delivery coordination between manufacturers and customers and the electronic exchange of delivery information, shipping papers, and transport documentation.

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Simplify your delivery coordination with TradeLink

According to a recent survey we conducted, TradeLink customers and users aim to achieve the following goals through our collaboration:

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But what are the proven benefits and expected results of using transparent, digitized delivery coordination with partners, customers, and suppliers?

• 30% cost savings in inboundand outbound processes
• 60% less downtime in inbound and outbound logistics
• 20% higher storage capacity and reduction in working capital
• 100% transparency regarding the performance of suppliers and service providers

Use digital workflow platforms for collaborative delivery coordination. These platforms already exist, and you don't need to be a prophet to know that the most user-friendly collaboration solutions will prevail. Collaboration must be user-friendly, and the best and most effective solution is always the one with the highest user acceptance and the best adoption by partners. 

TradeLink is the simplest and most effective form of delivery coordination on the market. Simplify logistics—see for yourself.