Weekly Roundup - Procurement Benchmarking, Mercedes-Benz’s Improved Picking Performance and Disruptions from Deforestation Regulation

The COVID-19 pandemic severely disrupted the automotive sector, particularly affecting semiconductor supply chains. As demand dropped, automakers cut production, leading to a shortage when demand rebounded. This crisis underscored the importance of effective procurement capabilities. Companies with adaptive procurement teams managed to maintain supplies, while others faced delays, resulting in an estimated 13 million fewer vehicles produced in 2021 and 2022. According to a McKinsey report, effective procurement is linked to higher profitability, with top-tier organizations achieving better EBITDA margins. Modern procurement teams must navigate challenges such as inflation, supply chain risks, and sustainability, prompting a shift towards supplier diversification and dynamic pricing strategies. Digital transformations are critical to addressing talent shortages and enhancing procurement efficiency.

High-performing procurement functions excel across multiple areas, including strategy, category management, digital tools, data analytics, and skills. Successful examples include companies that have invested in digital tools and training, achieving significant cost savings and improving their procurement benchmarks. Digital capabilities are a key differentiator, with top organizations leveraging data-driven decision-making for substantial savings. Sustainability is also crucial, with leading procurement teams integrating sustainable practices to improve performance and mitigate future risks. Technological advancements are making sophisticated tools more accessible, allowing smaller organizations to enhance their procurement practices. This shift is leveling the playing field, enabling organizations of all sizes to achieve procurement excellence through data-driven decision-making and innovative approaches.

Mercedes-Benz's logistics center in Fürth has significantly improved its picking performance with the introduction of Nimmsta's Industrial Smart Watch. According to a press release from the Munich-based wearable provider, the smart watches were introduced in January 2022, marking a major step towards optimizing processes and easing work by keeping hands free, speeding up processes, and enhancing direct interaction with the warehouse management system. During multi-order picking, logistics staff pick five orders simultaneously, boosting productivity. The process involves pre-equipping containers, receiving information on the smart watch about storage locations and quantities, and minimizing errors through multi-stage feedback that includes error messages and visual and acoustic alerts. The smart watch also helps with managing empty compartments by allowing employees to confirm or correct the status directly on the device, ensuring accurate inventory management. It supports tasks related to incoming goods and transfer orders by specifying empty storage compartments and linking storage places with goods.

US paper makers are warning that a new EU law requiring them to trace timber origins could disrupt $3.5 billion in trade and raise prices for hygiene products like diapers and sanitary pads. The American Forest and Paper Association argues that the EU Deforestation Regulation (EUDR) is unfeasible due to the diffuse nature of pulp supply chains and a two-year lag between tree cutting and fiber production. The US industry, which supplies about 60% of the EU's "fluff pulp" needs, could see significant cost increases, leading to inflation in the EU. The association and US officials are seeking a delay in the law's implementation, set for year-end, and a low-risk categorization for the sector to avoid the traceability requirement. The EU aims to reduce global deforestation linked to its consumption by mandating traceability for all commodities entering the region. Procter & Gamble and Kimberly-Clark, major suppliers of hygiene products in Europe, have stated compliance with the law. Some supply agreements have already been affected, putting future contracts at risk.

Read more on recent highlights

• BMW leads German premium car brands in first-half sales
• China’s CATL in talks to raise $1.5 billion supply chain fund
• GM to invest $900 million to retool Michigan auto plant to build EVs
• Amazon Prime Day deals create logistics nightmare
• Lululemon accused of greenwashing environmental goals, impact
• First market in Germany records falling peak logistics rent
• Volkswagen may close Brussels factory as low EV demand hits Audi
• Industrial dispute: Dockers strike in Brake in Lower Saxony

Dive deep into research

"From bottlenecks to inflation: Impact of global supply-chain disruptions on inflation in select Asian economies" by Platitas, R.J.C. and Ocampo, J.C.G. (2024)

"Deep learning approaches to identify order status in a complex supply chain" by Bassiouni, M.M, Chakrabortty, R.K., Sallam, K.M. and Hussain, O.K. (2024)

Events

Supply Chain Europe 2024

When: 28. - 29. October 2024

Where: Amsterdam, Netherlands

What: Facing increased scrutiny from discerning customers, incoming regulations and internal leadership, the need for supply chain transformation has never been greater. However, a combination of economic, geo-political, and cultural challenges are blocking progress, leaving supply chain leaders on the back foot, damaging relations with senior leadership and halting digital investments. Reuters Events: Supply Chain Europe 2024 will give you the tools to build a supply chain that is digitally primed, committed and accountable, resilient and cost-effective and Value Driven.

Websummit

When: 11. - 14. November 2024

Where: Lisbon, Portugal

What: At a time of great uncertainty for many industries and, indeed, the world itself, we gather policymakers, heads of state, and the founders and CEOs of technology companies and fast-growing startups, to ask a simple question: Where to next?

SEMICON EUROPA

When: 12. - 15. November 2024

Where: Munich, Germany

What: This year’s theme Innovation and Collaboration: Powering Sustainable Exponential Growth expresses SEMICON Europa support to the European semiconductor ecosystem, highlighting the important role in driving sustainable exponential growth through innovation and strategic collaborations. Only by fostering collaborative efforts, the semiconductor industry ensures its rapid expansion aligning with global sustainability goals. This way the industry will be able to pave the way for a future where technological advancement and environmental progress coexist harmoniously.