Risk management in multi-tier supply chains (Daimler)

Risk management in complex multi-tier supply chains is a critical factor, especially for series manufacturers.

Risk management in complex multi-tier supply chains is a critical factor, especially for series manufacturers. Particularly in series and mass production, quality or delivery problems can lead to reputationally damaging and costly recalls.

As 1st tier suppliers are usually very closely monitored and generally suffer from a low probability of failure, the focus of this project was on the development of strategies for effective and efficient supplier management at the 2nd and 3rd delivery levels, as failures there can have an indirect impact on the delivery capability of 1st tier suppliers in the form of missing or faulty components.

But how does an OEM audit and evaluate indirect supply chains of 1st-tier suppliers?

Complexity massively managed

The initial proposals of large consulting firms for end-to-end multi-tier management via self-disclosure portals were logically coherent and impressively illustrated. However, the quantity structures of suppliers, commercial, legal and logistical challenges and realistic runtimes for representative penetration alone did not appear feasible without important adjustments.

Complexity massively reduced

Our approach was therefore to find methodically suitable filters so that we only had to manage suppliers that met the minimum relevance criteria:

From the OEM's perspective, one of the filters was the question of which parts in the supply chain are critical (i.e. not easily replaceable). From the perspective of the 1st tier suppliers, it was checked, among other things, which 2nd tier suppliers are critical (i.e. not easily replaceable) for parts identified in this way. This chain was adequately continued at every level.

The procedure basically corresponds to the procedure in a binary tree. With suitable filters and algorithms, even the most complex construct can be efficiently reduced to the essential elements.

As a result, the proposals of the large consulting companies could be addressed in a commercially and logistically sensible manner on a drastically reduced volume.

Conclusion

There are many ways to solve problems. And it is not uncommon for a clever combination of concepts to lead to the best result.

If you have any further questions about this case, please do not hesitate to contact us. We will be happy to discuss your questions with you.

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