Andreas Größler

May 14, 2020

The impact of Covid-19 on supply networks of companies

Scientists from the University of Stuttgart explain which solutions help companies

At present, it is not yet possible to estimate the overall impact of the Covid-19 crisis. An important area that is already severely affected is the economic system. Prof. Andreas Größler, Institute of Business Administration at the University of Stuttgart, and his doctoral student Marc Wiedenmann investigated what companies can learn from the crisis and which solutions should be implemented.

Nowadays, most companies are part of a globally connected supply network and therefore do not act independently. Although interest in supply network management has been increasing steadily in recent years, many companies are still not prepared for Covid-19. One can see that, during the Covid-19 crisis, supply networks are confronted with three different problems, explain Wiedenmann and Größler. For one thing, some supply networks are faced with a disproportionately high demand, such as for hygiene products (toilet paper). The second problem is that demand is too low, as is currently the case in the tourism industry. A third scenario for companies is network disruption, where there are interruptions in the supply chain, for example, when shipping companies cannot operate.

The scientists see one solution in supply risk management. “The crisis makes risk management an essential part of every company and supply network,” they say. Interdisciplinary teams would have to find ways to identify and assess supply risks and to develop action strategies, so that companies could react in the best possible way.

Gaining transparency of supply networks

The basis for achieving this goal is the creation of transparency in regard to the multi-layer structure of the supply network. In the case of Covid-19, this means that those countries where supply shortages may occur can be immediately matched against the supply relationships that are critical to the company’s business.

Diversifying supply networks

Companies are also trying to replace their supply relationships, for example with China, with alternatives in order to be less dependent on one country. China will continue to play a decisive role in the global economy, but efforts will be made to further diversify the supply network and become less dependent on local conditions.

Collecting and evaluating data and information

Finally, it is crucial for companies to continuously monitor the identified and assessed risks and, if necessary, adjust decisions accordingly in the event of changes in risk exposure. Data and information are the most important assets of the future. Through proactive measures, such as the implementation of simulation approaches in the risk management of supply networks, companies can better prepare for possible future scenarios.

Prof. Andreas Größler
Institute of Business Administration (BWI), University of Stuttgart
Areas of Research: Economics, Production Technologies, Simulation Sciences
Marc Wiedenmann
Institute of Business Administration (BWI), University of Stuttgart

Shortreport: No back to normal. COVID-19 turns Supply Risk Management into a necessity

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