The Covid-19 pandemic has shown us that safeguarding material supply and building up business structures able to cope with crises are increasingly important.
“Companies that have carried out risk analysis do better during a crisis,” says Martin Kurdve from RISE.
Industrial production today relies on the global flow of materials and raw materials where logistics is key. When everything runs smoothly, it is a cost-effective approach that is difficult to compete against, but when something in the chain fails, the effects spread quickly, which in the worst case can lead to production stoppages and customers who are left without goods. Rapid changes in the market can also result in great difficulties for an industry.
An example of this was evident during the Covid-19 pandemic when the demand for certain types of hospital materials and personal protective equipment became so great that hospital and healthcare staff, i.e. those who needed the equipment the most, did not have an adequate supply. The pandemic has also had consequences for many industrial companies, which now have major problems in obtaining materials for their production.
“There is currently a huge shortage of materials in almost all areas,” says Martin Kurdve, Researcher in the Materials and Production unit at RISE. “One example is the automotive industry, which has a shortage of electronics. Another example is wood products. If you want to build wooden decking this year, you may pay about three times as much compared to before.”
Industry can support society
An issue that has always been important but which has become more pertinent in recent years is how Swedish industry should be better equipped to deal with similar or worse crises, such as wars and natural disasters, and what role it can play for the rest of society.
Kurdve believes that the Covid- pandemic has shown that many industrial companies have both the opportunity and the willingness to help when essential services are unable to function:
“There is very strong willingness in the industry to support society – to be part of the well-functioning Swedish society. Take the example of personal protective equipment, where many larger companies that furloughed workers and received financial support from the state, quickly and voluntarily provided staff to make protective visors, aprons and other things that were needed.”
Many industrial companies in Sweden are engaged in contract manufacturing, and their strength lies in being able to adapt and convert their production.
“We have quite a few small and medium-sized companies that are agile and adaptable,” says Kurdve. “In the event of a crisis, only 10 to 20 percent of the companies need to be able to adapt their production quickly; not all industries have to be as fast.”
It is important to have adequate communication with subcontractors and the subcontractor’s subcontractors
Emergency reserves a hot topic
During the initial period of the pandemic, a dominant issue related to Sweden’s shortage of emergency reserves. This was in contrast to Finland, which was able to use protective equipment from its emergency reserves, thereby avoiding the material shortages experienced by Sweden.
“Finland had a considerably lower infection rate compared to us,” says Kurdve. “If we had had the same level of emergency reserves, we would have coped for a few weeks, but then we would still have had to find a new supply chain as the consumption of these different materials increased between two- and fifty-fold.”
Even though he believes that one does not exclude the other, Kurdve says that adaptable and rapid transition in industry is often preferable to maintaining large emergency reserves:
“This is especially true when it comes to disposable materials, face masks or protective aprons, it is better to have good processes in place to start production.”
Risk analysis secures deliveries and production
Safeguarding deliveries and production is highly dependent on conducting risk analyses, reviewing supplier contracts, and finding weak points in the business.
“The best manufacturers always require that there is more than one production site that delivers a certain component,” says Kurdve. “That means there is a plan B in the event of trade barriers, war, pandemics, or if a site were to shut down due to illness.”
Another important element in creating a robust and resilient industrial company is to have guidelines for communicating with all subcontractors and for controlling what information is shared.
“It is important to have adequate communication with subcontractors and the subcontractor’s subcontractors, so as to create an information chain,” says Kurdve. “It’s also important to decide what information can be shared and that no business-critical information can fall into the wrong hands.”
Food supply a big challenge
But how would Sweden cope in a worst-case scenario, such as war or something else that severely limited our ability to trade with other countries?
“If we become entirely closed off, the biggest challenge is perhaps food supply,” suggest Kurdve. “Otherwise, we have an abundance of raw materials and building materials and energy, even though there is a lot of talk about energy shortages in the future. But in industry there are great opportunities to save energy, and we can probably also recycle and reuse materials to a greater extent in the event of a crisis.”
The area of sustainable production includes safeguarding material supply and possessing a production system that is resilient and stable and that can handle variation
Labour supply is critical
Besides materials and raw materials, access to labour is also important in the event of war.
“In that case, we would need to train the workforce quickly, and this is something for which we have seen significant possibilities for improvement,” says Kurdve. “For example, learning through visual, digital work duties would be a possibility. Projects undertaken by RISE have shown that this makes it possible for people who can neither speak the Swedish language nor read and write to perform a high-quality job in an industrial environment.”
Expertise in resilience during a crisis
RISE has long worked with questions about how companies and authorities can become more resilient when faced with crises, with the training programme Production Boost being one example.
“There we coach companies to become more robust and agile and to strengthen their ability to adapt,” explains Kurdve.
RISE also has expertise in how companies can safeguard their production and cope with rapid and unexpected changes.
“The area of sustainable production includes safeguarding material supply and possessing a production system that is resilient and stable and that can handle variation,” says Kurdve.
The first step for those seeking to increase their knowledge about how a company can better equip itself is to join one of the production clusters run by RISE in collaboration with universities and companies.
“It’s a meeting place for manufacturing companies in Sweden. We have seminars, arrange research projects and disseminate knowledge about these issues,” concludes Martin Kurdve.