How to manage the energy crisis in the supply chain

Logistics and Supply Chain News

From Gartner Supply Chain Symposium London 2022

The topic of transforming models is a key element in many conversations and energy is being added to that. Sarah Watt, Analyst at Gartner, took a look at the way energy is impacting operations and how the industry can make a better use of it, during the annual Gartner Supply Chain Symposium | Xpo in London.

‘Energy costs in Europe are volatile and uncertain and we can’t rely on history to predict the future. This is a unique situation but we know that business and society are experiencing significant impacts today. This is driving inflation and 45% of executives say energy is impacting business continuity.’

So what can be done?

The starting position for energy should be who the fight is with. We have very little to no input over what is happening at the energy market. Winning means being responsive in a way that is better than the competition and developing a long term energy strategy. This needs to include multiple dimensions: energy offset strategy and a portfolio of response actions.

Energy costs

Businesses are seeing a large increase in cost and nothing can offset them but there are strategies. Managers need to think about how to manage energy supply. Energy brokers can help think about the purchasing strategy and the supplier relationship. ‘We are seeing more democratised supply. It will all take a degree of investment and you will never be fully self sufficient but think about your different sites,’ Watt urged the audience.

Energy has been a historically cheap resource but we need to treat it as the precious resource it is. All manufacturing facilities are suffering from waste of energy and waste of money. The old way of thinking was that there will always be some kind of waste and it has no value to the business. But the new mindset is what would happen if the waste can be turned into useful energy.

Energy consumption

Businesses are focusing more and more on how they consume energy. Intel & Del, for example, address the issue at the point of design. There is thinking around modularity and supply chain professionals are expecting an increase in profits after implementing circular economy principles.

Energy security

Energy challenges will continue for the next couple of years. Thinking about physical security risks is not enough. ‘Have we made sure we are prepared with a backup supply in case we need it?’ Watt asked.

Cybersecurity risk dimensions are emerging to this as well. Number of businesses are having cybersecurity attacks. 59% of leaders do not plan to connect physical and cybersecurity parts of the business but this could be a mistake.

‘Look for opportunities to integrate what each part of the business is doing to sort out the risks. The main failure point was physical security but cybersecurity is being added now,’ Watt continued.

Decarbonisation and energy

Sustainability programs can help with the challenges around energy. 80% of respondents in a Gartner survey on the topic say that sustainability helps them to optimise costs. But why?

It acts as an accelerator and has clear benefits for keeping these programs. 83% say sustainability helps them to create direct short and long term value to help them recover from disruptions.

87% of business leaders plan to increase investment in sustainability in the next 2 years. The topic is way more important to stakeholders so companies cannot give up on it. There needs to be a plan for success when it comes to decarbonisation.

‘You need to understand what growth means for decarbonisation plans. Some emissions have not been factored in when looking at growth,’ Watt said.‘Analyse your supply based greenhouse emissions. Set your baseline. Build competency: many people have never done anything like this before. Do not wait to have all the information before making a decision,’ she finished, urging the audience to take actions now.

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