Supply Chain Resilience in Germany and the US

Reliable business to business relations, managing expectations and fulfilling demands are crucial for every company. With the ever-changing demand of goods and services from consumers, supply chain resilience is an important asset to have in any company. In this article, we will analyze what supply chain resilience is, what it looks like in the US and Germany and discuss the future of supply chain resilience.?

What is Supply Chain Resilience??

Supply chain resilience is defined as a supply chain that has the capability to recover from disruptions quickly and limit the impact of these disruptions on the company. 1 Disruptions to supply chains include unexpected competition, new market trends, changes in customer behaviors, and unexpected disasters, such as the COVID-19 pandemic. The most resilient supply chains are built to anticipate issues before they occur and respond quickly when disruptions arise. Companies can use four key measurements to assess their supply chain resilience level- time to awareness (TTAW), time to action (TTA), time to recover (TTR), and time to survive (TTS). If this strategy is used correctly, it can have a large impact on costs and the overall time to survive. 2?

Status of Supply Chains in Germany:?

Like most global companies, German businesses, too, rely on global supplier networks to receive and send goods. Germany has recently been experiencing disruptions in supply due to geopolitical and global economic shocks such as shipment vessels navigating around southern Africa, delaying journeys from Asia to Europe by several weeks. Additionally, as of 2023, Germany’s Supply Chain Act puts an increased emphasis on companies to respect human rights, such as the right to fair pay, and to protect the environment when operating a global supply chain. 3 4?

With this in mind, German businesses continue to make efforts to increase supply chain resilience. In fact, 75% of German companies strengthened their supply chain resilience over the past year. Solutions for stronger supply chains include diversification, smart digitization, and focusing on environmental, social, and governance (ESG) goals. 5 Diversification involves working with multiple suppliers rather than just one to help reduce disruptions. Smart digitization allows companies to utilize data to predict disruptions and track their supply chains digitally. While working to improve supply chain resilience, keeping ESG goals in mind allows companies to track their environmental and social impact and how that affects supply chains such as ensuring safe working conditions for all employees. This ensures supply chain operations are not disturbed.?

Status of Supply Chains in the US:?

Similar to Germany, the United States has experienced disruptions to its supply chain due to conditions out of its control. The war in Ukraine and inflation caused by product shortages are just some of the disruptions experienced.??

The United States Trade Representative (USTR) has been working on creating a new way to approach trade and investment that puts supply chain resilience at the forefront. 6 The four main goals of this plan are transparency, diversity, security, and sustainability. USTR plans to promote transparency by alleviating supply chain risks that come from unfair trade. Diversity is enhanced by creating opportunities for companies of all sizes to maximize sourcing options. Security measures will be taken by USTR to strengthen trusted networks with shared values through friend-shoring and near-shoring. Finally, sustainability will be enhanced through environmental protections governing supply chains and respecting labor standards.??

The Future of Supply Chain Resilience:?

Resilient supply chains allow businesses to operate more efficiently, improve productivity, and reduce risks. Modern supply chain technologies and switching to a digital workspace give companies the resources they need to respond quickly to disruptions and new opportunities. AI, machine learning, and modern data are some examples of ways modern technology can help predict disruptions and analyze patterns in supply chains.??

The Midwestern United States is comprised of many companies in the German American business community striving for a resilient supply chain. Need support or advice to improve your supply chain resilience? GACC Midwest member companies are well-experienced and an excellent source for you to get in touch with. Contact us!?

Keep in touch with us by subscribing to GACC Midwest's newsletters for updates on events and German American business news.?

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Sources:?

1. SAP https://www.sap.com/products/scm/integrated-business-planning/what-is-a-resilient-supply-chain.html??
2. Strategy& (2023) https://www.strategyand.pwc.com/de/en/functions/operations/resilient-supply-chain-for-procurement.html??
3. Bloomberg (2024) https://www.bloomberg.com/news/newsletters/2024-02-15/supply-chain-latest-german-companies-and-supply-chain-risks??
4. Federal Ministry of Labour and Social Affairs https://www.bmas.de/EN/Europe-and-the-World/International/Supply-Chain-Act/supply-chain-act.html??
5. KPMG https://kpmg.com/de/en/home/industries/industrial-manufacturing/resilient-supply-chains-security-in-the-manufacturing-industry.html??
6. United States Trade Representative (2024) https://www.federalregister.gov/documents/2024/03/07/2024-04869/request-for-comments-on-promoting-supply-chain-resilience??