Strategic Shift: Transforming Supply Chains from Checkers to Chess for Global Resilience

By Carsten Franke, Chief Operations Officer and Gregor Dudek, SVP Supply Chain, Electrolux Group.

As recent geopolitical events remind us, we are living in a VUCA world, where Volatility, Uncertainty, Complexity and Ambiguity are the new normal for global supply chains. Organizational agility, resilience and access to data are the keys to helping supply chains cope with these constant challenges.

Once upon a time, supply chains were something that CEOs and CFOs accepted as happening out of sight in the ‘engine room’ of a business. As long as the supply was steady, there was no need to get too involved.

How times have changed! The management of supply chains has taken on strategic importance for organizations like ours here at Electrolux Group.

That’s because we are all living in what some global affairs commentators refer to as ‘VUCA’ world. And we are all so interconnected now that geopolitical events have ripple effects on supply chains right across the globe.

When you’re a company like Electrolux Group, with our supply chain of 50 million products, the potential impacts are huge. Many in our and other industries have experienced shortages of components and delays in global logistics flows that can increase transportation costs, lengthen lead times and affect product availability.

And yet, we have become used to dealing with frequent supply chain disruptions over the past few years, even before the Covid-19 pandemic. In fact, a Supply Chain Stability Index created by KPMG and the Association for Supply Chain Management shows that the world was already dealing with extensive supply chain uncertainty as far back as 2018.

The US-China Trade War, industry cyberattacks, port strikes and extreme weather events such as massive winter storms or hurricanes were among the contributing factors back then. Now, it’s conflicts in Ukraine and the Middle East, protectionist tariffs that affect the import of key components, earthquakes in Asia and the recent bridge accident in Baltimore harbour that are occupying our thoughts and planning meetings.

Of course, consumers still want their products regardless of what is happening in the world. Being capable of meeting our promise is a competitive advantage that can quickly become a competitive disadvantage if we don’t fulfill that promise. If we can’t deliver quality products on time to our customers and consumers, they will simply go elsewhere. It’s a very competitive market with new entrants appearing all the time.

Add to this the disruptive technologies arising from our digital age, and it’s clear we shouldn’t expect stability any time soon. Therefore, supply chain resilience and supporting an omnichannel approach to supply chain management are vital, especially in the consumer goods sector.

Electrolux Group’s resilience journey

But strength comes from adversity. With each new challenge to our supply chain, we at Electrolux Group have made sure to learn the lessons, so we are better equipped to deal with future issues as they arise. As a result, we are becoming a consumer-driven supply chain network that is reliable, fast and resilient.

Through experience, training and a process of further empowering our teams, our people now have an even more agile mindset to dealing with problems as soon as they arise, rather than reporting up the line and awaiting instructions. Add to that our continuous embrace of all the possibilities of data, we are in a much stronger position to respond proactively and quickly to challenges.

We have some very recent examples of this.

In the aftermath of the Baltimore bridge collapse in late March, our ocean logistics team members could quickly establish which vessels carrying our goods were bound for Baltimore, which alternative ports were available, and how the incident would affect those other ports’ capacities.

Immediately after the recent Taiwan earthquake, the team’s integrated thinking enabled them to identify which semiconductor plants were affected in terms of microchip production, a key part of electronics in some of our white goods.

These sorts of proactive approaches are also helping to manage the complexities arising from the ongoing disturbances in the Red Sea region.

Of course, close relationships with suppliers also help us to adapt to particular circumstances as they arise, by giving us flexibility we would not have had if our relationships had been characterized by a purely transactional nature.

Omnichannel approach connects with changing consumer journey

We also want to enable and support an omnichannel approach to selling, which can be leveraged by our commercial teams in flexible ways, market by market.

We have seen omnichannel emerge as one answer to the continuing uncertainties in supply chains and in customer behaviors in our interconnected and digitalized world. Consumers are no longer shopping in one particular way or place. Directly online, in-store, digitally through third-party retailers, marketplace, direct from the supplier…the level of retail competition and the sheer breadth of it has increased hugely since the pandemic, so our supply chain has to respond with the appropriate flexibility. And whatever the channel, they expect a seamless, holistic and consistent consumer experience from their brand of choice.

We’re on this journey at Electrolux Group now, setting up supply chain solutions for the mix and interplay of traditional business, e-commerce and direct-to-consumer, as it is defined in commercial strategies region-by-region and market-by-market.

It’s clear that this omnichannel approach is the best response to the new unpredictable landscape of consumer preferences. By providing them with the maximum support for their freedom of choice, and by linking the channels together, we control our total, not just our simple costs. We need to be ready to respond to these trends as this will give us the edge on our competitors in what is now a fractured and challenging market.

Better prepared for the journey ahead

The new normal with all its abnormalities shows no signs of going away in the near future. However, we at Electrolux Group feel confident that we can continue to adapt, survive and even thrive despite the ever-changing picture.

In the past, we were playing checkers. Now, with the steps that we have taken with people, processes and digitization, we are able to play a chess game, with a strategic view of our next moves rather than short-term fixes.

We are a resilient organization that is better prepared for the journey ahead.