Big Ideas 2022: Transforming supply chains

The most recent cover of the New Yorker shows Santa Claus pulling a container ship stacked with presents into port. Even Santa it seems is concerned about supply chain disruptions this year.

The pandemic has exposed the vulnerability of our supply chains. The Delta variant forces factory closure in Asia, and it has a ripple effect around the world. A shortage of semiconductor chips stalls automotive production. Order backlogs are leading to empty shelves.

Some might say this is proof that globalization doesn’t work anymore, that the just-in-time model leaves us without a backup plan. But global trade is important. It is a source of economic growth; it has lifted millions out of poverty and given us more affordable goods.

What we need to do is to transform supply chains to make them more diverse, creating a better balance between global and local, or as we call it, glocalization. That way we have a more equitable distribution of investment and jobs, in some cases creating shorter supply chains, which may have a lower carbon footprint.

When I asked our Head of Supply Chain Management, Klaus Staubitzer, how Siemens minimized the impact of supply chain issues, he attributed it to two factors. Firstly, by achieving high transparency and secondly through the trust we share with our global ecosystem of suppliers. And I would add a third one: digitalization.

Digital technologies can enable manufacturers to improve visibility, to diversify suppliers, and to respond faster to market changes. Because our plants and suppliers form part of an integrated value chain, we can flexibly shift production from one plant to another one in our manufacturing network that has available supplies.

We’re also leveraging these technologies to reach our sustainability goals. Today, around 90 percent of our products’ emissions occur in the supply chain. Our ambition is that by making our supply chain more transparent, we can work with our suppliers to reduce the carbon footprint of our products.

To protect against future shocks, many organizations will prioritize improving supply chain resiliency in 2022. Let’s use this opportunity to make them more equitable and sustainable too.

Finally, I would like to extend my sincere thanks to Klaus and his team, as well as our manufacturing teams, who, through their innovative approach, are making our supply chain both more resilient and more sustainable.