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16th TSM Supplier Management Workshop: Controlling Risks in Supply Chains

16. TSM-Workshop

COVID, blockade in the Suez Canal, Ukraine war: diverse exogenous risks have been burdening global supply chains for quite some time. These "black swans" endanger the already tense situation of supply chains. They pose major challenges for supplier managers. The 16th TSM Workshop on 9th June 2022 at the bbw Hochschule - University of Applied Sciences Berlin presented solutions on how those responsible in purchasing and logistics can deal with these external and internal risks. The event was co-organised by the German Association of Materials Management, Purchasing and Logistics (BME).

The Chancellor of the bbw Hochschule - University of Applied Sciences Ursula Schwill welcomed the 45 or so participants, and offered the company representatives educational projects - especially in the subject areas of innovation and process development. The focus of the all-day workshop was the management method of "Total Supplier Management" (TSM), which was presented by its founder Prof. Robert Dust. According to Prof. Dust, "Total" targets all suppliers and all relevant risks. Because even supposedly small, insignificant suppliers could bring supply chains to a standstill. "In today's world, just-in-sequence is hardly realisable. Because if one component is missing, the assembly line comes to a complete standstill," said the speaker, referring to the global situation of supply chains. Prof. Dust advocated a preventive approach to risk management based on trend and pattern recognition and forecasting models. A decisive measure of success, he said, was the determination of supplier-specific process costs - cost savings in this area would lead to an EBIT increase of two to six percent with the TSM method.

Dirk Nowak, Head of Quality Management in Purchasing at Deutz AG, explained to the workshop participants how the TSM method is applied in practice in his company. The tradition-rich engine manufacturer from Cologne has its approximately 1,000 suppliers firmly under control with the TSM system. The trigger for the introduction of an additional, holistic risk management was the insolvency of a key supplier, says Nowak. Thanks to the establishment of a "supplier cockpit" and a supplier steering committee, Deutz now monitors 95 % of the purchasing volume and wants to further digitalise the processes and expand the system. A newly created team for "Supplier Escalation Management" now meets twice a week to discuss critical suppliers and initiate immediate measures - an important tool to keep the supply chains running.

Martin Grastat, Managing Director of TSM Supply Bridge GmbH, then presented the technical possibilities of the TSM software that supports the system on the IT side. "Keeping an overview, mastering the complexity of supply chains, acting preventively" is Grastat's credo - and this is exactly what the TSM software enables. He advocated breaking away from reactive approaches and organically grown, confusing IT system worlds and using a holistic tool that literally puts all relevant risks "on the screen" at a glance. The TSM enterprise solution he presented works with watch lists and a self-learning algorithm. This now has a 90% hit rate in forecasting risks in the supply chains. Exogenous risks such as natural disasters, wars or sustainability aspects can be integrated into the TSM software via external modules.

The aspect of sustainability and the new Supply Chain Act (LSKG) was the main topic of the following presentation by Yvonne Jamal. The CEO of the JARO Institute for Sustainability and Digitalisation e.V. addressed today's "supply chains in crisis mode". She highlighted in particular the aspects of human rights violations and environmental destruction within supply chains. Jamal appealed to buyers to trace critical suppliers and their supply chains back to the source, i.e. the production of raw materials, and to evaluate them. The challenges were particularly clear in the example of the automotive industry - for example in the lack of availability of critical materials such as cobalt, lithium or rare earths, without which electromobility could not be implemented. Here, in addition to the aspect of sustainability, there would also be the security of supply. Yvonne Jamal also outlined the challenges of climate change. With regard to sustainably produced products, she made it clear: "Purchasing has great leverage here and at the same time a great responsibility" to promote these products. She also wanted sustainability to be understood as social sustainability, especially with regard to labour protection, the prohibition of child labour and fair wages in developing countries, where many of the West's suppliers are based. "The LSKG strengthens the role of sustainable procurement in this regard".

The closing speech was given by IT expert Eugen Shashkou, Managing Director of Prime Elephants GmbH. He advocated that companies fully exploit the potential of digitalisation in order not to fall behind the competition. In doing so, he described the downfall of Nokia's mobile phone division as a cautionary example of two internal development teams that had fallen behind in technological development with a confrontational attitude. The IT expert called on the participants to also focus on cooperation instead of confrontation when using software tools, for example when using Share Points or MS Teams for collaboration. He made it clear that the start-up-typical "culture of failure" was in itself a very positive thing, from which groundbreaking innovations and disruptive trends had developed time and again. He pleaded for investing time and trust in suppliers to develop new ideas and innovations together with them.

Author: Bruno Lukas, 12th June 2022

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