The Automotive industry supply chain is being buffeted by many converging disruptions at the moment - shortages of semi-conductors, fluctuating demand, and shipping issues to name just a few.
To hear more about this and how digitisation is helping I invited Matthias Haberstroh, the Head of Supply Chain Management at ZF’s Commercial Vehicle Technology division, and Nikhil Balkundi from Infosys to come on the podcast.
We had a fascinating conversation around supply chain digitisation, the impacts on the automotive industry, and what future Automotive supply chains will look like. As usual, I learned loads, and I hope you do too...
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Getting the data together to have it at a at a single click using certain data science to to make the decision making and do a bit of automation so that everybody doesn't have to take the decision manual planning. These are the three things which I see cutting across the clients.Tom Raftery:
Good morning, good afternoon, or good evening wherever you are in the world. This is the digital supply chain podcast, the number one podcast focusing on the digitization of supply chain. And I'm your host, global vice president of SAP. Tom Raftery. Hi, everyone. Welcome to the digital supply chain podcast. My name is Tom Raftery with SAP and with me on the podcast today. I have my two guests. Nickel and Matthias. Gentlemen, would you like to introduce yourselves? Maybe Matthias go first?Matthias Haberstroh:
Yeah, for sure. Thanks for invitation. So I'm Matthias head of supply chain management within commercial vehicle of ZF Friedrichshafen so in charge of supply chains around the globe. So we have a global footprint, roughly 40 plants dealing with all products, which are in a in a commercial vehicle bus interacts and yeah, so I'm the process owner within that division for for all what's in content of supply chains and and logistics engineering. Yeah, since roughly 20 years at sadef, sadef. And in different roles, mainly in supply chain management and logistics. 40 years old, and happy to be here.Tom Raftery:
Fantastic. Thanks, Matthias and Nikhil.Nikhil Balkundi:
Hi, I'm Nikhil. I work for Infosys. I lead the SAP IBP and SAP APO, which is SAP supply chain practice, working for Infosys for last 16 years, roughly 20 years in, in supply chain domain, and mostly look after the supply chain transformation project. And along with Matthias, I work on this digital SOP transformation for for Sedef. So that's my brief introduction.Tom Raftery:
Superb so far, we're in a kind of a weird kind of a strange time in supply chain. I mean, we hear supply chain stories in the news every day now, which was something that if I had said this to you two years ago, you'd have thought I was going crazy, because no one had ever heard a supply chain two years ago. And now everyone knows the expression. And we're seeing a huge increase as well in the digitization of supply chain, supply chain transformation initiatives are taking off all over the place. A lot of that has been accelerated, I think, by the pandemic, but do you agree? Do you think it's the pandemic pandemic has kicked us off? Or are there other factors? Or how do you see it falling out?Matthias Haberstroh:
Yeah, if I would start, I would say the pandemic is a is a trigger to or pushed us very quickly during the last two years in that topic. And it's not. We saw or see this focus since a couple of years on supply chains we have worked on that we see challenges on that. But started with the pandemic SQF mentioned, we see really, that there is a push in all the topics, a lot of disruptions there. And it's not only the pandemic, when you look to the news, that's the semiconductor. It's the floating in Germany, it's Wessels in the Suez Canal, whatever, so a lot of disruptions in the supply chain within a short period and that and that's make it very challenging for us on a daily base, but no boring time. So we have guide us and through that times and work step by step to improve the situation.Tom Raftery:
Okay, and Nikhil,Nikhil Balkundi:
yes, I think I kind of echo what Matthias has just said that the problems in supply chain existed even before the pandemic in fact, it is the it is the same set of problem. So, so, for example, forecast accuracy improvement was always there on the radar, then lead time and the variation associated with that is always there and demand supply, balancing, multi sourcing locations, etc, were the problems which existed even before the pandemic, what pandemic did is think it kind of brought everything on the table and and it didn't allow people to kind of postpone the, the solutions associated with them. So it became right here right now kind of kind of a situation to solve some of this supply chain problem. So so so it kind of accelerated the whole thing. So So pandemic, yes, in a way pandemic did bring a lot of the supply chain initiatives of the table. But at the same time, there were pre existing problem and the supply chain were having its own challenges anything. So that's how I can see what happened over the last couple of years.Tom Raftery:
Okay, I mean, I remember being at an event in South Africa in 2019. And one of my colleagues, Hans talebearer, at the time was giving a talk on supply chain disruption. And he was talking about Brexit as one of the factors and climate disasters, as you know, other things, and he was saying that there will be more disruptions happening. And we were all going now obviously, we had no idea that this pandemic was coming down the line and the kind of disruption the data wrought on all of our supply chains. So, yeah, it I think it's been a huge forcing factor. I think a lot of people were doing proofs of concept, maybe with digitization projects in their supply chains, but this became a huge forcing factor that made people you know, it was it was kind of that burning platform that we talked about that made people kind of jumpMatthias Haberstroh:
absolutely, I would say, I mean, what we see with the pandemic is that it's really a global disruptions, now, we had all this kind of disruption during the last years single issues in in some areas, some regions of the world and this print new on that and the effect is seen on the whole world and that makes it more complex on that two men for sure.Tom Raftery:
Okay, and Matthias How has the pandemic affected supply chain for your industry, I mean, you guys are making parts for the automotive industry and then the commercial vehicles as you said, you know, has there been a huge drop in demand or pickup in demand again, or you know, as it as it kind of fluctuated that way or, and how has that impacted on your supply chainMatthias Haberstroh:
and as I would say, to a multiple topics that in the first phase it was really this shutdowns which caused a lot of problems so you you had in single areas shutdowns and and you have to manage missing the parts of on the inbound side, how you make products finished for us or South America was not affected in early beginning. So how we steer that global ones that that was the first one then at least when we had to face of global topic, for sure there was decreasing demands on that. But the business come back. You personally, all we are, we were sitting at that time at home what we did, we we bought on platforms and products, what we get so tracks was I'm in a commercial vehicle as mentioned. So it it will need to access to bring the material to you, the clothes, the food, whatever. So there was really a demand to to manage all this bottlenecks. But quite crazy and and today. And then was a phase, I would say, linked to the semiconductor issue that really in Asia, regional was affected with a lot of semiconductor factories. which products are in trouble. And now it's the regional ones. There's a hotspot, there's a hotspot they closing for two weeks, and what do we do on that? So in summary, a lot of different faces, a lot of topics. Yeah, that's what we see. And we have to manage.Tom Raftery:
Okay, and moving forward. I mean, there's the whole shift to the electrification of transportation in general, commercial vehicles are going to be very soon shifting to electric as well. Is that going to have a big impact on you guys?Matthias Haberstroh:
Yeah, that's imperative. I mean, that's mega, as well. Not easy on that. We have on one hand, and that started before the transformation of the whole industry. Automotive has, since 100. Year to know the most challenging time in general regarding technology, is he mobility topic, autonomous driving, whatever. So yeah, the Iron Man, I always say with having steel. In the cars, we are changing our supply chain completely. And in addition, this this pandemic topic to manage both the transformation of the industry and that disruptions, yeah, is two things in parallel. We have to manage them,Tom Raftery:
and how are you managing them? How are you managing all that disruption?Matthias Haberstroh:
We have a lot of efforts. Yeah, I mean, first of all, and that's coming back to what Nikhil mentioned in the in the early beginning. I think that that method The parameters that that current areas be we have our longtime known supply chain. And then we we had, and we are in the middle of that to have a task force mode anymore only living in the task force. And now, as well looking in the future, the challenge is to look on these concepts on these methods and this well known processes and transfer that with the lessons learned out of the out of the task force mode in a future orientated systems and solutions processes VF. Okay, so and that's, that's the challenge at the moment really, to find resources in the organization not to make daily troubleshooting, only to find the resources and bring it into area to learn on from that and, and establish the right system process and methods on debts. And I mean, Nikhil and our common project work, you see that from an outside perspective, definitely, that our team is also struggling with that to find the find the time slots to work on sustainable solutions for the future.Tom Raftery:
Okay, Nikhil, what would you say to people who are listening, who are managing supply chains, and may be thinking, I need to figure out some way to avoid disruption of my supply chain and the future? What would your advice be to them?Nikhil Balkundi:
Yeah, see, the point is, the human nature is such that we always go by our worst experiences, right. So so if you have to go from place A to place B, and normally takes 30 minutes, and on a bad day to one and a half hours, we will always try to think it will always be one and a half hours. So even when pandemic will go away, the impact of, of the disruptions that it caused will stay with us. For example, some of the Infosys customers in paper industry up north that is in the Nordics, the Suez Canal got choked for for a week or so. Now, suddenly, we see the increase in the in three increase in the inventory on the markets which got affected, we see a lot of investment in the transport management solution, we see this digital supply chain of tracking get into it, etc. Because nobody wants to be in that situation again, that if the same thing has to happen again, then then people want them to be insulated from this kind of problems going forward. Right? So the same thing will happen in all the other places of the supply chain, right. So so we see a lot of product mix changes, like for example, one of the jewelry industry client we have is, is now talking about Island first time I learned that females were different jewellery is when it is indoors and when it is outdoors, right. And in pandemic more of the indoor jewellery which which picked up and outdoor jewelry went down. And then it's like a complete churn in the product mix or so and so forth. So, I think now, these are the things which will, which will stay with people for long. And whenever you have to kind of reengineering reengineer, your supply chain process, then obviously, you have to make investment in certain digital technologies. So even if the impact of pandemic will go down, as we go forward, I still see the investments and the reengineering of the supply chain process and preparing ourselves better for for the next round of change or next round of disruption. That kind of mindset will continue for next two, three years or who knows, maybe, maybe more. So that's what we'll that's what will happen as we go forward.Matthias Haberstroh:
I mean, to add to add one point, sorry, I mean, we will have as well in the future, this kind of disruptions in the supply chain, the managing is how we deal with them and how digitalization support it us in that topic. The first one is to risk alerts and things like that. And I would say that helps at least to win some days, some some hours upfront, to react more quickly. That's, that's important, but that won't help us that much in the future on that. The second topic is the the visibility and data out of the supply chains. There's definitely things to do. But we did good progress in the last the whole business on debt in the last couple of years on debt. But we've posed the risk alerts and the visibility we had in the past the chance to execute the solutions in a more manual way with experts, which are aware of that, and they did the right decisions, and thanks to manage the tour through the whole business on that. But with this lot of disruptions we had currently. And during the last two years, it's not manageable without a clear execution, tools, landscape and processes to manage that. And that's our main challenge we have in the whole industry to have an execution system available, which is manageable from a from a complexity point of view, but brings us in the situation to react quickly and make the right decisions and executed.Tom Raftery:
Okay, so that visibility I'm hearing is crucial.Matthias Haberstroh:
Crucial. Yeah, but well known, there's a lot of things to do to be to be at the high end for sure. We are not done. We have good pilots, we have some supply chains, Java goods, we have technologies in place. So but not, the rollout is not finished. But that's something we have to execute. And to do that that's not the issue. But in in, in the field of execution systems. Like we do it in the project, they kill with the IVP. And that's our things. I think that's quite important as well in the future, to be quick and make the right decision and be beat fast on that.Tom Raftery:
Okay. And Nikhil, if you had to advise people on three initiatives to undertake to make their supply chains more resilient, what would you say?Nikhil Balkundi:
I think some of the points Matthias already covered so, so important point is having the data available at a single place, which is what Matthias was talking about as the initiatives like the digital supply chain, where we kind of bring everything together. Second thing what I see is more data science being used in decision making, which is like we do a bit of optimization that if the demand is more than the supply available, how do you allocate using the scientific techniques. And And the third thing is, is this whole concept of artificial intelligence or something that the problem with the current crisis is it has changed both the demand side parameters as well as the supply side parameters, I think, all the previous crisis, for example, 2000 2007 2008 or 2001 2002, it affected on the demand side, but now it affected even the supply side. So it is becoming very difficult for for average planner to do everything manually. So they need a lot of support for doing this decision making in an automated way. So just to summarize, getting the data together to have it at a at a single click, using certain data science to make the decision making and do a bit of automation so that everybody doesn't have to take the decision manual planning. These are the these are the three things which I see cutting across the clients. So that's what I foresee.Tom Raftery:
Okay, and looking forward to the future. I mean, we're hoping that we'll get through this pandemic, and we'll get into a post pandemic world. How do you see supply chains operating in a post pandemic world? Obviously, we're not going to go back to the way we were beforehand, because now a lot of organizations will have, you know, digitize their supply chains more, but how do you see supply chains of the future looking? Let's start with you Nikhil.Nikhil Balkundi:
Let's see one thing is we will never go back to the pre pandemic kind of planning is what I foresee. Just take a simple example I think pre pandemic, how much of my valid share I was going in a shop and buying and do after the pandemic what is what is my current valid share almost everything I buy online including the daily grocery. Now, what that means is think it from the other end as a supply chain professional, if if the goods have to be delivered to my home as against the grocery store or supermarket nearby, it means there is so much impact on the supply chain, the number of number of points and number of replenishment point and number of data points we have to cover in terms of doing the supply chain planning has completely gone gone, gone change and everything is not going to come back to the pre pandemic era, because these have changed the habits of the customer. So once the habits change and people people realize that the digital thing and and ordering online and the comforts that they're getting now, so nobody is going to go back to the pre pandemic era. So So I see that the life will never go back to the same level as what it was in a pre pandemic pandemic era for a supply chain planner. So post pandemic, all those things which we have done in last 18 months to two years, will will more likely continue as as the forward. So that's how I see things going forward.Tom Raftery:
Okay, and Matthias, I mean, you're going to be operating a supply chain going forward, hopefully post pandemic, we've mentioned some of the challenges already autonomous vehicles electrification of transport, Nikolas just pointed out there that we're going to be buying a lot more stuff online or continue to buy stuff online, which will increase demand for the kind of commercial vehicles that you are producing or producing components for. So how do you see, I mean, you probably already have plans for what you're gonna be doing the next five years for supply chains, what are they looking like? What are your priorities there?Matthias Haberstroh:
they are starting starting at the footprint and the supply chains itself, I think, to be more resilient on that, the dual sourcing strategy and be more flexible on that will increase on that. So I don't see that we go back to reach No, for regional, that's also not the solution on that. But we will have more more dual sourcing Clover foods brings on that, which brings at the end more complexity in supply chains as well. So that's something we have to manage it. Regarding the digitalization, I would say, the good thing out of the pandemic is the people my stuff are pushed now to work digital on that simply topics like we do today, with a team's meeting, to to talk to each other that's topics, which we never did before. So that's something which will also have an impact to our daily business in in working on the processes on that. So people learned a lot during that regard regarding processes and and methods, I hope that we use the time and half the time to transfer the lessons learned and ad hoc topics we did during the last two day informal Sabir processes on that digital processes on that. And that's something we plan as well for the upcoming year. So we have this initiative, digital as an LP with with Nikhil and Infosys to go on a journey for the upcoming years, really, to work on that. And that's something which is great. And last but not least, you mentioned the autonomous driving that help us at the end, hopefully, to optimize and be more efficient in our processes, which are physical to be on a cost side as as well as active on that. So let's start at four dimensions, at least, I see. Which will drive our daily work and our future optimization.Tom Raftery:
Great, super, super. Gentlemen, we're coming towards the end of the podcast. Now, is there any question that I have not asked that you wish I had, or any topic we've not discussed that you think it's important for people to be aware of?Matthias Haberstroh:
Nothing in my head. So all goodTom Raftery:
Okay, Nikhil...Nikhil Balkundi:
Nothing in my head as well.Tom Raftery:
It's Friday afternoon! Superb, superb bright.Matthias Haberstroh:
So nothing open.Tom Raftery:
Gentlemen, that's great. Thanks a million for coming on the podcast. If people want to know more about yourself, Nikhil, or you Matthias or Infosys? Or, or ZF? Where would you have me direct them?Nikhil Balkundi:
Yes, I think in Infosys, we have this sub section on our website infosys.com/sap. Where a lot of point of views etc. Put up there. So I will, I'll definitely send you a link you can include it. So that's where they can go.Tom Raftery:
Okay, and for yourself personally. Are you happy for people to reach out to you on LinkedIn or similar?Nikhil Balkundi:
Yeah, they can link reach out to me on LinkedIn, but I think infosys.com/sap will also direct them to me.Tom Raftery:
Superb and MatthiasMatthias Haberstroh:
Yeah, the same for us. So ZF.com You get more about ZF on the social medias as well and I'm happy as well to your feedbacks from the community. And as well interested in interactions withTom Raftery:
brilliant, super, gentlemen. That's been great. Thanks a million for coming on the podcast today. Thank you. Thank you. Okay, we've come to the end of the show. Thanks everyone for listening. If you'd like to know more about digital supply chains, head on over to sa p.com/digital supply chain or, or simply drop me an email to Tom Raftery at sa p.com. If you'd like to show, please don't forget to subscribe to it and your podcast application of choice to get new episodes as soon as they're published. Also, please don't forget to rate and review the podcast. It really does help new people to find the show. Thanks. catch you all next time.