Achieving Resilience during the Economic Crisis in Europe: A Guide for Industries in Energy and Natural Resources
The current economic crisis is impacting asset-intensive industries, especially in Europe. Prices are increasing across the board, suppliers are at risk of bankruptcy, and inflation is the highest it has been in a decade. Companies are now forced to make time-sensitive decisions on how to steer through the winter months and into 2023. This is especially critical for energy-intensive industries such as chemicals, utilities, and mining. Decisions must be made to ensure profitability either by increasing prices, seeking out new suppliers (either because the existing ones have become too expensive, cannot deliver anymore, or even have declared bankruptcy), or move production to lower cost regions.
For the chemical industry, the current economic situation is disrupting like never before. The Ukraine crisis has uncovered risks to energy security, sustainability, and affordable access to energy. Energy transition must be made robust with adequate enablers and support mechanisms. Many countries are also facing high inflation, and resultant policies are feeding global recession fears. Upstream suppliers also risk disrupting the supply chain, with many closing their doors due to high energy costs and inflation. Also, the long-term impact is hard to judge due to the uncertainty of when the crisis will end. As an industry heavily reliant on gas and energy, it must show great agility to master this crisis and come out on top and profitable.
“These challenging framework conditions in Europe endanger the international competitiveness of European producers and force us to adapt our cost structures as quickly as possible and also permanently. “
The situation in Europe is incredibly disruptive to businesses and has caused a ripple effect across the value chain. SAP is here to help you respond to both immediate challenges and to help you prepare for the future.
Many organizations struggle to get real-time insights around the globe or to simulate price increases for their product portfolio and production landscape across the USA, Europe, or Asia. The need to analyze data and simulate scenarios to protect margins and cost calculation requires the correct data from many lines of businesses to assess current and future variable and fixed costs
Companies need to look at multiple dimensions and actionable, real-time (or near-time) insights as the foundation for decision-making.
React and Adapt Production to volatile demand
In an economic crisis, you need to be able to make fast, informed decisions. It is imperative to find a balance between risk, inventory investment and customer service to manage inventory targets. Optimizing supply management with plans based on prioritized demands, allocations, and constraints will strengthen your supply and response planning. If your partner collaboration is digitized, you can share insights and data and improve planning, forecasting, predictability, and supply quality.
Automate Risk Mitigation
With so much uncertainty in the energy-intensive industries such as chemicals, utilities, and mining during this crisis, it is critical to monitor risk positions, commodity price changes and currency conversion rates. In addition, there is a need to balance risk, have visibility into cash management and monitor all investments. With the SAP Treasury and Risk Management application, you can integrate cash flows, transactions, commodity positions, market data, and optimize straight-through processing. This will help you gain a centralized, real-time view of your company’s cash position and forecast with end-to-end
Insightful Spend Analysis
You can’t manage what you can’t measure, and one of the fastest, most efficient ways to save money in a crisis is to gain insight into where money is being spent and optimize and reduce spending habits. The SAP Ariba spend analysis solution gathers your spend data from wherever it lives, classify it according to company and industry standards, and then enriches it with Dun & Bradstreet market intelligence. The result is an objective, insightful analysis of your organization’s spending habits and the opportunities you have to save money and improve supplier relationships. With these insights, companies can identify savings opportunities and mitigate risk.
Reduce Supply Chain Disruption
To protect both revenue and reputation, companies need to be able to mitigate supply chain and operational disruption. Especially in this volatile economic situation in Europe, now it is imperative that companies can identify suppliers who may be at risk. With Ariba Supplier Risk Management, our customers can be sure that they are making well-informed decisions that will prevent supply chain disruptions.
Manage Energy Consumption
Finally, companies must take more proactive action to manage their energy consumption. With the dramatic increase in energy cost in Europe, there is an urgent need to focus on improving efficiencies, identifying anomalies, and analyzing consumption data across plants. Improving efficiency in this area will not only save money, but will also contribute to a more sustainable future by decreasing waste and carbon. Using AI (Artificial Intelligence) technology from the Business Technology Platform can achieve maximum energy efficiency with minimum environmental impact.
There is no magic formula that can help businesses plan around the realities of inflation or economic unrest. Still, technology can provide a way to become resilient to weather the storm. SAP software solutions can provide options to understand economic circumstances, predict the impact, and take short-term action to solidify a position of strength.
What is your company doing to adapt to the current economic situation? We welcome your insights and would love to have a conversation about this.