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A missing widget or the delayed delivery of tin of paint can cause a whole supply chain to come to a halt.
Despite being something the function has been challenged with since Peter Kraljic first introduced his matrix in the 1980’s, there is still no one single approach for a business to reduce the risk of a bottleneck arising.
Based on a 2x2 framework, the Kraljic matrix is based on ‘supply risk’ and ‘profit impact’ and sets out to help procurement determine how it can maximise buying power while minimising risk.
Bottleneck items sit on the high risk, low profit end of the scale. Here goods tend to come from just one supplier or are a product that experiences frequent delays in terms of delivery. In these situations, the whole supply chain is at the mercy of one lapse in concentration.
As established as this matrix may be, has procurement actually become any better equipped to dealing with such situations or avoiding them all together?
Some functions have decided they aren’t and, as a result, have implemented new processes and dedicated staff to the challenge.
In a recent interview with Procurement Leaders, Volkswagen’s (VW) capacity, cost and process management manager, Karsten Schnake, outlined the automotive giant’s personal approach to bottlenecks, both pre-bottleneck and post-bottleneck.
VW, Schnake said, take a proactive approach to avoiding bottlenecks and that technology is a key part of its attempts to reduce this risk with the company in the process of building a digital network whereby everyone involved in supply chain risk can communicate effectively and highlight potential problem areas.
“We can see far in front of any type of potential bottlenecks so that all the different departments involved can align around the situation and resolve the issue,” he said.
“By standardising these processes, we reduce the likelihood of a situation that would damage the brand arising.”
But, as with anything associated with risk, plans can never be completely watertight.
When a bottleneck does happen, Volkswagen makes quick but temporary changes to its supply chain. For example, when the supply of a component or service is stopped because of a natural disaster, the company switches to using air flight rather than ships.
Key to the company’s approach though is that it never acts alone.
“If we run into a situation where we have to stop production, we immediately engage all the relevant departments, such as technical, quality, marketing, sales, production and logistics and look for solutions together,” said Schnake.
Get your processes and strategy right and you may just start mitigating a significant risk.
This article is a piece of independent writing by a member of Procurement Leaders’ content team.