Diversification: How SMEs stabilize supply chains

Stabilizing supply chains. Targeting diversification.

SMEs with a global presence felt the effects of the coronavirus crisis on all fronts. So what should you do when global supply chains are suddenly interrupted? This is the challenge that mb-microtec ag faced during the spring of 2020. In the latest SME study, CEO Roger Siegenthaler explains why he will be focusing increasingly on diversification in the future. 

Lockdown led to bottlenecks for the SME

mb-microtec ag, based in Niederwangen near Bern, is a globally renowned manufacturer of self-illuminating gaseous light sources. The company is a global market leader and supplies the watchmaking, security, automotive, and aerospace industries. A lucrative niche business. But then, in the spring of 2020, the coronavirus pandemic broke out and many countries went into lockdown. As a result, global supply chains came to a standstill.

"Initially, the outbreak of the virus really scared us," says CEO Roger Siegenthaler, speaking about the situation in the latest Credit Suisse SME study. The internationally operating Swiss company experienced bottlenecks on two fronts: imports and exports.

Failure of the key import supply chain

"We have an extensive internal value creation chain," explains Roger Siegenthaler, "but our primary raw material, tritium, is critical to our work; tritium is a waste product from heavy-water reactors and is not available everywhere in the world."

The company secures its stocks from a single supplier, which is based in Canada. Highly problematic if there is a ban on transatlantic air traffic. It proved difficult to source a new supplier without notice, not least because mb-microtec ag leases the transportation container from the supplier.

A sharp slump in demand for exports

mb-microtec ag experienced a significant decline in demand for exports, driven by the fact that it sells 90% of the goods it produces abroad. "In the watchmaking industry, sales in the US and Asia slumped sharply and it was no longer possible to visit traders," explains the CEO.

In Asian countries in particular, personal contact is important when it comes to establishing business relationships. This meant that it was almost impossible to secure new distributors.

Diversification of suppliers reduces dependencies

Despite the challenges it faced, mb-microtec ag did not have to apply for an emergency loan. "We supply various industries, so we were able to absorb sales losses," explains Roger Siegenthaler. Nonetheless, the coronavirus crisis confirmed the findings of the company's own risk analysis: the single sourcing of tritium is a major risk.

In a bid to reduce its dependence on transatlantic suppliers, mb-microtec ag plans to work in collaboration with European companies to create a European hub. The aim of the strategy is to guarantee supply via road. In addition, the SME has begun the process of constructing a transportation container to provide it with greater flexibility when it comes to its choice of supplier.

Investing in areas outside of the core business makes SMEs stronger

mb-microtec ag was already looking for new business opportunities in areas outside of its core business, even before the coronavirus crisis began. "We have created a specific role within the management team for this purpose," says Roger Siegenthaler. So while the plans ultimately had to be postponed due to the crisis, the intention is there.

During the crisis, mb-microtec ag also realized that it needed to make greater investments in product development. One of the options the company is considering in this area is offering rental solutions as well as selling products. "The crisis has forced us to move, to be courageous, and to try new things," says Roger Siegenthaler, adding: "It's given us an opportunity."

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