Monthly Roundup #1: McDonald's E. Coli Crisis, Hershey's Automation Push, and BMW’s Digital Factory Advancements
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The latest McKinsey Global Supply Chain Leader Survey underscores that supply chain issues remain pervasive in 2024, with 90% of respondents encountering significant challenges. This survey reveals that companies may be easing off on resilience measures, despite persistent vulnerabilities. Notably, many firms are not fully prepared to identify or mitigate risks effectively, and board-level discussions on supply chain issues remain limited. Only a quarter of companies report having formal processes for discussing supply chain risks at the executive level, which could expose organizations to further disruptions if left unaddressed.
One major area of focus is inventory strategy. Survey data shows that companies are split in their approach to managing inventory. Nearly half of the respondents plan to maintain inventory levels, some adjusting assortment or distribution across networks. In contrast, around 46% expect to reduce or remove risk buffers, aiming to bring inventories closer to or even below pre-pandemic levels. Only a small fraction, 7%, intend to increase inventory levels, suggesting a reluctance to rely on large safety stocks as a long-term risk management strategy. This split highlights diverse approaches to balancing supply chain resilience with cost efficiency, as firms grapple with whether to sustain high inventory levels for protection or revert to leaner models to reduce costs.
Progress on key resilience strategies, such as dual-sourcing, regionalization, and nearshoring, appears to have plateaued over the past two years. Although these strategies have proven beneficial in strengthening supply chain resilience, the survey reveals that fewer companies are actively pursuing them. Digitization efforts, particularly in advanced planning and scheduling systems, have also slowed after a period of rapid growth between 2020 and 2023. While interest in APS systems is high, with two-thirds of companies investing in them, only 10% have completed deployment, reflecting potential implementation challenges. Furthermore, one-third of respondents lack a clear business case for these systems, and 15% report that APS initiatives have not met business objectives. These figures suggest that companies may not be fully capitalizing on APS systems’ potential to enhance forecasting, rapid response, and scenario planning.
McDonald's is urgently addressing an E. coli outbreak linked to its Quarter Pounder burgers by examining its supply chain, particularly its sources of onions and beef patties. The company, alongside the CDC, is scrutinizing its Chicago-based suppliers to determine how contamination might have occurred. Initial reports from the U.S. Department of Agriculture suggest that onions are the likely source of the outbreak, though tests on beef samples are ongoing. Historically, McDonald's has maintained rigorous safety standards across its supply chain, which has helped it avoid major food safety issues for decades. However, this incident raises serious concerns about supply chain vulnerabilities, especially since E. coli outbreaks have increasingly stemmed from produce contaminated by nearby cattle farms. McDonald's suppliers regularly test for pathogens, yet the strain responsible for this outbreak went undetected, exposing potential gaps in quality control and prompting a reassessment of supplier protocols. The outbreak poses a significant risk to McDonald’s reputation and may affect its earnings. Food safety experts and attorneys highlight that swift identification and removal of contaminated products from the supply chain will be crucial to limit further damage. The crisis has also raised broader industry concerns about the complexity and risks involved in managing large-scale food supply chains for global fast-food chains.
Hershey is investing $250 million in its "Advancing Agility and Automation" initiative to enhance agility, visibility, and efficiency in its supply chain by 2026. This initiative will integrate technology and automation across its procurement, manufacturing, and planning processes, building on a prior $1 billion supply chain investment. By leveraging SAP’s S/4 ERP platform, Hershey aims to consolidate operations, unify recently acquired brands, and increase inventory visibility, allowing for more precise demand and supply alignment. The program, supported by newly appointed CTO Deepak Bhatia, is expected to yield $300 million in annual savings by reducing waste, optimizing inventory, and accelerating product innovation cycles.
The BMW's Regensburg plant is advancing toward a fully digital and automated logistics system as part of its BMW iFACTORY initiative, aiming to create a "digital factory of the future." Producing a unique vehicle every 57 seconds, the plant ships up to 1,400 BMW X1 and X2 models daily, including combustion, hybrid, and electric versions, tailored to individual customer needs. Managing the complex logistics involves cloud-based, automated systems such as the BMW Automated Transport Services, which coordinates driverless transport vehicles for timely part deliveries. The plant's fleet includes nearly 50 automated route trains and over 140 Smart Transport Robots, capable of transporting up to a ton of parts. These systems, controlled by ATS, streamline traffic flow and optimize part delivery to prevent production interruptions. As BMW continues to expand its autonomous fleet with new vehicle types, including pallet trucks and forklifts, it aims to create a seamlessly integrated logistics network that ensures efficient and flexible vehicle assembly.
Read more on recent highlights
Dive deep into research
“Towards autonomous supply chains: Definition, characteristics, conceptual framework, and autonomy levels” by Xu, L., Mak, S., Proselkov, Y. and Brintrup, A. (2024)
“Improving efficiency and sustainability via supply chain optimization through CNNs and BiLSTM” by Dalal, S., Lilhore, U.K., Simaiya, S., Radulescu, M. and Belascu, L. (2024)
“Sustainable supply chains in?the?heavy vehicle and equipment industry: a multiple-case study of?four manufacturers” by Shekarian, E., Prashar, A., Majava, J., Khan, I.S., Ayati, S.M. and Sillanp??, I. (2023)
“Digital transformation and sustainable performance: the mediating role of triple-A supply chain capabilities” by Mohaghegh, M.,?Blasi, S.,?Russo, I.?and?Baldi, B.
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