Buck Consultants International has launched a new framework that helps multinational companies design and improve their global supply chains.
The launch of the new framework comes at a time of major supply disruption worldwide, as event such as Ukraine-Russia conflict, geopolitical pressures and economic uncertainty impact the entire logistical value chain – from raw materials sourcing and manufacturing through to transport, warehousing and deliver to end users.
“At Buck Consultants International, we believe that developing and implementing a successful supply chain strategy requires an end-to-end value chain vision,” said Rene Buck, CEO of the management consultancy firm.
This is where the firm’s new DE-5 framework comes in. “It helps businesses develop resilience and operate successfully in a climate characterized by volatility, uncertainty, complexity, and ambiguity,” explained Buck.
Based on decades of data and thousands of data points, and an award-winning track record (Buck Consultants International recently was named one of the world’s leading management consulting firms by Forbes), the framework revolves around five pillars that link to the operations of multinational companies.
The first point in the framework is ‘De-coupling’ from ‘risky’ markets. Buck: “Over the past years, increasing trade tensions have led companies to decrease their exposure to certain regions – including China. Although those regions remain important markets, their competitiveness as a global production hub has been decreasing due to rising costs of labor and a more difficult regulatory environment.”
The second dimension is ‘De-single sourcing’. This relates to the recent global economic disruption that has exposed the vulnerability of the world's supply chains, especially with the advent of the just-in-time manufacturing model.
According to Buck, “there was a point during 2020 when the operations of more than 90% of automotive manufacturing plants in Europe were affected due to lockdowns. To address this, many companies are now looking to multi-sourcing models.”
Thirdly, the framework advocates the need to ‘de-risk supply chains’. “Companies will look to de-risk their supply chains through more intensive inventory planning. This includes increasing the amount of inventory held, necessitating the need for more warehouse space. While this reduces risk, it also represents significant costs, such as having to set up new production and distribution operations or expand or consolidate. Other methods include demand forecasting by AI.”
The fourth point in the ‘De-5’ framework relates to ‘De-centralizing production’, which is sometimes known as reshoring, where production capacity is brought back to the market of origin, such as the United States or Europe.
“There are also more subtle ways of de-centralizing”, adds Buck, “such as maintaining the overseas production capacity but placing the additional capacity closer to home. Some multinationals with decentralized production have a plant in Central or Eastern Europe for the European markets, a plant in Mexico for North America, and a plant in Southeast Asia for Asian markets.”
The fifth pillar of the framework is ‘De-carbonization’. “Businesses are looking to reduce carbon emissions due to international regulations and changing client expectations. This dovetails with decentralization of production, as not having to ship products across long distances reduces carbon emissions.”
“Having to retool production processes to comply with environmental regulations is a huge cost, so companies need to plan their course of action effectively to ensure that production is not impacted.”
An integral part of the portfolio
The new model forms an integral part of Buck Consultants International’s supply chain offering to its clients. The firm also has propositions for strategic location analysis, scenario planning, footprint planning (manufacturing, distribution), cost assessment (including capital expenditures, operating expenditures, and transition costs), and carbon footprint, among others.
“We specialize in understanding what’s going on in specific industry and geo-markets and translating those trends into scenarios that our clients understand. We assess them in a holistic way by looking into cost, customer impact, conditions, and carbon, so they can make the best possible decision,” Buck concludes.