The Investments Required for a Resilient Supply Chain
Siemens Financial Services explores how to build a supply chain that can navigate future challenges
More than three years have passed since the COVID-19 pandemic forced the world into lockdown and triggered a massive test of our global supply chain. In this post-pandemic market, some experts indicate that supply chain disruption has eased to pre-pandemic levels with the reopening of China’s economy as well as shifts in supply and demand.
Others suggest that the market is still struggling to move past those disruptors.
As a lender in the industrial space, I’m focused on how we can build a more resilient supply chain that can navigate current and future challenges by investing locally and focusing on digitalization and sustainability.
This section of the report is sponsored by Siemens Financial Services and originally appeared in the Summer 2023 edition of Middle Market Executive.
The Biden administration’s monumental investments in climate and sustainability will lower energy costs, accelerate private investment in clean energy solutions, create jobs and economic opportunity, and strengthen supply chains across sectors.
They say history repeats itself, and while there are bound to be other disruptors in the future such as resource scarcity, climate change and congestion, I believe these investments and collective efforts will help ensure that our global supply chain can withstand future challenges.
A Shift to ‘Glocal’
For decades, the private sector focused narrowly on the cost of supply chains, creating a global network of suppliers to support global customers. The pandemic, however, revealed the inherent threats of the reliance on such long supply chains, which come under incredible pressure when disruption occurs. Now, many manufacturers have shifted their focus to gain more control over their supply chain and be better prepared for future disruptors that challenge geographic proximity. This trend of “glocalization” helps tap into global networks of innovation but allows responsiveness to local customer needs with more manufacturing and supply chain support nearby.
This shift will cause the Americas region to rely heavily on Latin America going forward. In 2020, Siemens Financial Services (SFS) launched a separate financing entity in Latin America called Siemens Servicios Comerciales to offer competitive financing solutions and invest in the region. Backed by our knowledge and experience across sectors, we’re ensuring that tapping into the region’s talent and opportunity is mutually beneficial and improves the quality of life of the region’s people.
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In Colombia, SFS helped long-term Siemens customer Tecnoglass—a leading manufacturer of architectural glass and associated aluminum products for the global commercial and residential construction industries—with a refinancing solution. It allowed the company to update production equipment in existing plants as well as production and energy efficiency solutions for a new facility.
The Future Is Digital
As manufacturing shifts back to the Americas, digitalization—the process of digitalizing information to draw insights used to identify new opportunities for product innovation— is important for ensuring efficiency and optimizing business operations. It helps businesses address manufacturing inefficiencies and identify market trends and supply chain disturbances and is being adopted rapidly across sectors.
Siemens Vice President and Head of Supply Chain Management in the Americas Patric Stadtfeld explained to me that data transparency is key in building a supply chain that is more resilient than our pre-pandemic one proved to be. “Manufacturers are focused on implementing digital solutions to better prepare for potential disruptions such as global conflict, decarbonization goals, glocalization, etc.,” he told me. “Those who aren’t investing in this space will find it harder to integrate themselves in the market going forward.”
Working with manufacturers toward the goal of digitalized facilities, Siemens’ “smart factory” technologies utilize data for predicting maintenance needs, increasing productivity and meeting sustainability goals.
Siemens is supporting Kore Power, Inc.—the leading U.S.-based developer of battery cell technology for the clean energy and e-mobility industries—with its future lithium-ion battery cell production facility. Smart factory technology from Siemens and leading investment capital from SFS will help accelerate the build-out of the digitalized facility, which will address the rapidly growing demand for battery cells due in large part to electric vehicle (EV) and renewable energy applications.
Speaking of EV and renewable energy applications, digitalization plays an important role in the race to sustainability. “As the global population continues to grow and resource limitation becomes more prominent, digitalization allows us to achieve more while using less,” Chief Procurement Officer for Siemens Digital Industries Jens Eckert explained to me. “For example, a digital simulation within a digital twin environment can replace physical prototypes, thus reducing the resources used in product development and creating a more sustainable business.”
Sustainable Solutions
In our modern market, companies are being held accountable for their Scope 3 emissions and, along with decarbonizing their own operations, they are expected to build a sustainable supply chain. Businesses of all sizes must implement a sustainability strategy to compete in the market going forward. Large corporations—Siemens included—now require a carbon assessment as part of their vendor-selection process. However, implementing a sustainability strategy requires knowledge and access to capital that many small and medium-size enterprises (SMEs) and minority-owned businesses lack.
Luckily, lenders are stepping up to support these businesses with innovative solutions in an effort to create a more equitable and sustainable market while recognizing that SMEs make up 99.9% of businesses in the U.S. At SFS, our Kickstarter Capital program—a $100 million commitment to the decarbonization of SMEs—allows businesses to work with finance and technology experts to design and implement a sustainability strategy with minimal disruption to operations and cash flow.
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Additionally, innovative financing solutions like sustainability-linked loans can incentivize businesses to decarbonize. SFS and other lenders provided Crown Castle—a Texas-based communications infrastructure company—with a sustainability-linked loan with credit facility pricing subject to adjustment based on KPIs related to renewable energy and conversion to LED lights on cell towers. Solutions like this are mutually beneficial and incentivize the company to be greener.
Supply chain disruptors will come and go, but local investments, digitalization and sustainability are critical for ensuring that our supply chain can withstand disruptions in the future. Supporting SMEs and minority-owned businesses is critical in the transformation of our supply chain due to their huge share of the market. With a collective effort, including support from the government, we can build a stronger supply chain that can withstand future challenges.
Anthony Casciano is president and CEO of Siemens Financial Services, Inc., the U.S. financing arm of Siemens Financial Services (SFS). He is also CEO of SFS’ Project & Structured Finance Americas business unit, providing debt financing—including corporate lending, project finance and structured finance solutions—to clients across the region.
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