There have rarely been as many long strikes in Germany as there have recently, especially by employees in the transport sector - train drivers, airport security staff, flight attendants, ground staff and public transport workers, bus drivers. All employees from the so-called critical infrastructure sectors, which are indispensable not only for the everyday person, but also for businesses.
A strike in the transport sector not only affects the many commuters, travelers, and schoolchildren, but also the supply chains that make the world run. If employees or the goods required for pre-production, e.g. for car manufacturers, chemical plants or refineries arrive too late or not at all, this can lead to unplanned production losses and can trigger a chain reaction which, in the worst case, can bring the supply chain to a standstill.
Impact of the strikes on the economy and the supply chain
Alongside truck transport, rail is one of the most important transport pillars in the German economy's supply chain.
According to the German Federal Statistical Office, the transport volume moved via rail in 2022 was around 140 billion tonne-kilometres, which corresponds to a market share of 19.8%, low compared to road transport, which has a market share of 71.3%. Nevertheless, rail is an important and indispensable mode of transport for, for example, the transportation of hazardous goods required by the chemical industry, or parts and finished vehicles in the automotive industry. And according to the Federal Ministry for Digital and Transport Affairs, six of the eleven freight corridors in Europe run through Germany.
The recent increase in strikes in the transport sector has therefore not only led to supply bottlenecks and unintentional production losses in the country directly affected by a strike, but also in neighboring European countries, as the required goods arrive there late.
Dealing with risks in the supply chain
Similar to the current Suez Canal crisis, strikes require swift action to identify risks and take appropriate measures to maintain business operations and minimize revenue losses.
However, for proactive supply chain risk management, companies need absolute transparency, flexibility and collaboration across organizational boundaries to take targeted actions that make the supply chain more resilient.
So wouldn't it be cool to have an AI-supported tool in place that uses weather data, traffic data or geopolitical data to formulate possible scenarios that can be used to assess risks and take measures to optimize them, such as switching to other means of transport in the event of a rail strike?
Flexibility to react to the unexpected
To be able to react quickly to change, flexibility is one of the most important factors in maintaining a company's ability to do business. Ideally, this flexibility extends throughout the supply chain so that all companies involved can adapt to new circumstances.
In order to achieve this flexibility, risk strategies need to be designed into supply chain processes in advance. For example, alternative modes of transport should be identified, and rates negotiated for key components, products, and parts, despite possible additional costs, which in turn also reduces the risk of a delivery bottleneck or delivery delay for production and stabilizes the supply chain.
In addition to creating redundancies in logistics, more flexible production can also minimize the risks in production planning itself by using an ERP system with integrated production capabilities. This allows planners to optimize the entire operation, gain insight into all production processes through real-time data access and gain more transparency to make informed decisions.
Collaboration across company boundaries
In addition to transparency and flexibility, a good network of partners along the entire supply chain also helps to minimize risks. In this way, companies can work with their network of partners to find a quick solution for all parties involved in terms of alternative transportation modes or suppliers of critical components.
Even though the strikes have ended for the time being, strikes could still occur again in the coming weeks, especially on the railroads, if the parties do not reach an agreement.
To be prepared for this situation, companies should take proactive measures now to make the supply chain more resilient and thus avoid potential supply bottlenecks or even production stops.
For more information on how to proactively manage risk, download the latest Oxford Economics Research.
