Post on 03-Jul-2020
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CRISIS-PROOF SUPPLY CHAINSHOW SUPPLY CHAINS ARE ADAPTING IN THE WAKE OF COVID-19
WEBINAR, JUNE 22ND, 2020
UWE HAIZMANN
EAC INTERNATIONAL CONSULTING
▪ On 23rd Jan. lockdown of Wuhan
▪ COVID-19 outbreak domestically
Overseas shipment before CNY
December
China Covid-19 breakout
Restart work
from 3rd week
of February
CNY Covid-19 break-out in Europe
China recovery
Europe partial production
restart
▪ State Council facilitates restart of
production
▪ Large sized industrial company resumption
rate in 7 provinces reaches >70%
▪ Announcement of corrective policy (e.g.
tax) for industrial enterprise
▪ Large sized enterprise employee returnee
rate achieved 98.6%
▪ Domestic companies expand production
capacity (e.g. medical goods)
▪ Total export of 18.5 trl. EUR, 1.4%
growth vs. 2019
▪ Export of mechanical machinery
(-4%) and textile related (-20%)
decreased in first 5 months
compared to 2019
COVID-19 breakout strongly impacted China industrial
production and economy – mainly during first quarter of 2020
January February March April May
▪ 2020 April industrial revenue increased
5.1% compared to 2019, sales orders of
key industries steadily increases
MACHINERY& EQUIPMENT
Developing towards high-end
& intelligent manufacturing
COMPUTER & MOBILE PHONE SEMICONDUCTOR
27% of global exports
China’s manufacturing facilities are central to global supply
chains which depend on Chinese-made goods & components
MACHINERY& EQUIPMENT COMPUTER & MOBILE PHONE
90% of global production
China as world’s largest
exporter, producer & consumer
China’s manufacturing facilities are central to global supply
chains which depend on Chinese-made goods & components
SEMICONDUCTOR
SEMICONDUCTOR
42% of global new plants
China national strategic
development industry
China’s manufacturing facilities are central to global supply
chains which depend on Chinese-made goods & components
MACHINERY& EQUIPMENT COMPUTER & MOBILE PHONE
Demand Uncertainty
Weakening and strengthening
the demand for some industries
Logistic Bottlenecks
Impacting the ability to ship and
receive products on time
Workforce Restrictions
Delayed return of workforces, lack of
personnel mobility, and traffic
restrictions
E2E Supply Chain reliance
Dependency on other countries for raw
material/components
Low Supply Chain Transparency
Limited flexibility to identify alternative
suppliers with short notice
COVID-19 measures in China disrupted global supply chains on
different levels, from raw material shortages to demand fluctuations
European Drug Shortage
▪ Some 90% of active ingredients used
in generics are produced in China
▪ Supply chains for drugs are
vulnerable in Germany and Europe
Toyota
▪ Toyota Japan 16 plants affected
by supply chain disruption
during outbreak
▪ >100 automotive parts supplier
in China
Porsche
▪ Porsche closed its production in Germany at
the end of March
▪ Bottlenecks in global supply chains did not
permit regular production
German mechanical engineering companies
▪ EBM-papst: forced to use air freight at increased costs
▪ Bosch China: set up emergency team to re-source products
The effects forced globalized companies to shut down
factories and re-source products even outside of China
Main phase
COVID-19
impact China
Nov Dec Jan Feb Mar Apr
-30%
May
-20%
-10%
0%
10%
Production Manager Index Industrial Output Exports
Factory shut-downs in
February weakened
global supply chains
Reopening was led by
state-owned enterprises,
with >90% open at the
beginning of March
Since then, supply chains
in China have quickly
recovered, enabling
recovery of manufacturing
across the globe
April and May development already indicate significant
recovery in areas such as PMI, industrial production & exports
Pull Factors:Push Factors:
Business
Rising wages & ageing population
reducing cheap workforce in China
Suppliers shifting production
Lower wages and larger workforce,
e.g. in South East Asia
Access to large consumer markets
Risk
Exposure to trade conflicts
Stronger regulations in China (e.g.
environmental)
Free trade agreements (e.g. Vietnam)
Diversification of manufacturing
locations to reduce exposure
Political
Governments reducing access to
critical manufacturing sectors (e.g.
healthcare) for foreign companies
Governments encouraging local
companies to produce critical
components locally
Despite fast recovery, the crisis highlighted dependency
problems and accelerated ongoing shift of global supply chains
Pull Factors:Push Factors:
Business
Risk
Political
Despite fast recovery, the crisis highlighted dependency
problems and accelerated ongoing shift of global supply chains
What are strategies to optimize sourcing and
manufacturing locations in a complex global
network with constantly changing influences?
Companies can react to increasing complexity in international supply
chains by improving transparency & agility for existing networks …
1. Increased transparency & agility for existing networks
Digital supply chain transparency
Leverage big data and digital tools to create end-to-end transparency
on available resources and demand dynamics
Definition of micro supply chains
Flexible contracts with multiple suppliers close to demand locations
as a fall back option for established suppliers
Global scenario planning
Identify high-potential scenarios with the help of big data (e.g. for
pandemic development) and design response options in advance
Flexible production planning
Employ agile production assets & planning tools to be able to quickly
reprioritize and shift production capacity in case of supply shortage
Flexible
Supply
Chains
Nearshoring
Transferring manufacturing back to countries closer to targeted
consumer markets, e.g. in Eastern Europe
Complete Relocation
Leaving China behind to build up manufacturing in other countries
that are better suited for requirements
China plus 1
Diversifying operations by adding another location in Asia, but
keeping Chinese operations
Location
optimization
modes
2. Reorganization of manufacturing & sourcing locations
… and by building up additional or new production and
sourcing capabilities in diversified countries and regions
Environmental
Risks, e.g.
- emission
standards
- process
restrictions
Dependency
Risks, e.g.
- agility of
sourcing
- availability of
alternatives
High RiskLow Risk
Supply Chain
Risk Radar
Geopolitical
Risks, e.g.
- trade wars &
tariffs
- supply
interruptions
Operational
Risks, e.g.
- HR cost &
availability
- local supplier
access
Assessing a company’s
exposure to supply
chain risks as foundation
for deciding whether China
remains a good fit
Based on highest risks,
company can decide
which other locations
offer opportunities to
reduce specific risks
Often, nearby locations
can be more suitable than
shifting abroad
Supply chain risk analysis offers insights in company-
specific risk exposure to identify needs for alternative sources
MARKET INTELLIGENCEINTERNAL TRANSPARENCY
FOOTPRINT INTELLIGENCE TOOL
Production Footprint Intelligence - Dashboard
Size overview Asset ownership Size: 120,000 sqm
Building age: 12 years
Owernship: Rental
Contract partner: Government
Lease Price: -
Rental p.a. 0.2 mio EUR
Shanghai
Jiading
Business Envrionment
Cost level
China
BU - 1
Manufacturing
R&D
Warehouse
Location Name (EN) District Basket Size Chinese Name
M2 Jing'an District 1,674 n.a.
Soho Bar Jing'an District 1,401 苏荷酒吧(汉中路店)
Linx Club Huangpu District 1,372 n.a.
TAXX Huangpu District 1,310 n.a.
Kee Club (Huaihai Middle Road)Xuhui District 1,006 (淮海中路店)
Phebe Bar (Hengshan) Xuhui District 1,005 菲芘酒吧(衡山路店)
SOS Club (Huaihai Road) Huangpu District 808 SOS酒吧 (淮海中路)
Fusion Huangpu District 867 n.a.
Muse2 (Huangpu District Flagship Store)Huangpu District 633 Muse2 M2酒吧(黄浦区旗舰店)
Club S2 (People‘s square) Huangpu District 584 缪斯CLUB S2酒吧(人民广场店)
CLUB HI BOOM Yangpu District 529 n.a.
HI BABY CLUB Minhang District 520 n.a.
No.1 Bund Huangpu District 406 外滩源壹号
Fengwang Club Jing'an District 395 蜂王酒吧(大宁中心广场店)
The Fellas Huangpu District 374 n.a.
CLUB PARTY SPACE (Jing'an)Jing'an District 361 n.a.
Dianshang Wine Bar Changning District 325 典尚红酒吧
CLUB FAX(Jingan) Jing'an District 311 n.a.
Candor Huangpu District 305 n.a.
XTD Elevated Huangpu District 295 新天地朗庭酒店
Club Room Huangpu District 278 艾迪逊空间
WooBar Hongkou District 269 w酒店w层
Havana Bar Pudong District 268 n.a.
LONG Bar Huangpu District 268 廊吧
The Odd Couple Huangpu District 264 n.a.
Footprint tool is a smart
combination of external
and internal data
Full transparency on
internal assets & facility
footprint (i.e. production/
warehouse facilities/ R&D)
Macroeconomic, business
environment and cost data
to enable strategic
portfolio management
Footprint intelligence tool enables big data-based decisions on
production locations and optimized use of available resources
UWE HAIZMANN
Partner
Shanghai Office
Uwe.Haizmann@eac-consulting.de
T: +86-21-6350 8150*227
M: +86-139 165 92803
200050 Shanghai / P.R. of China
Contact Information
For over 20 years, Mr. Uwe Haizmann has been working and living in Shanghai. He joined EAC in 2008 and is the
global head and Partner in charge of EAC’s Operational Excellence practice.
Mr. Haizmann’s team in Shanghai focuses on operational excellence projects for European-based industrial and
consumer goods companies in Asia. He is fluent in German, English as well as Mandarin and holds an MBA
degree from the China Europe International Business School (CEIBS).
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