Siemens & SAP deliver supply chain resiliency through digitalization

By Justin DiNunzio

The year 2020 has brought a whole new set of challenges to industrial manufacturers – from travel restrictions and nationwide lockdowns to ensuring manufacturing safety through social distancing.  The impact of these challenges has had a disruptive effect on supply chains, everything from plant closures to shortages in raw materials.  And, when manufacturers cannot produce finished products or deliver them in a timely manner, consumers begin to look elsewhere impacting the cost of sales, brand loyalty, and bottom line profits.

Even a short disruption of 30 days or fewer can put 3 to 5 percent of EBITDA margin at stake.

McKinsey & Company, Reimagining Industrial Supply Chains

A recent McKinsey & Company report states, “On average, an auto manufacturer has around 250 tier-one suppliers, but the number proliferates to 18,000 across the full value chain. Aerospace manufacturers have an average of 200 tier-one suppliers and 12,000 across all tiers. Finally, technology companies have an average of 125 suppliers in their tier-one group and more than 7,000 across all tiers.”  The report goes on to state that “Companies that cannot successfully manage those complex and, at times, opaque supply chains are at high risk, especially if they cannot mitigate the risk of increasing disruptions. Even a short disruption of 30 days or fewer can put 3 to 5 percent of EBITDA margin at stake.”

So, how do manufacturing organizations address these new set of challenges and enable their supply chains to become more resilient in the face of disruption?  The answer is Industry 4.0 digitalization.

In July 2020, Siemens & SAP announced a strategic partnership to drive the digitalization of Industry 4.0. Through this partnership, the leader in enterprise application software and supply chain solutions is partnering with the leader in product lifecycle software and digital transformation.  The next-generation of integrated software, resulting from the partnership, opens the door to an improved and unique collaboration between two critical information silos – PLM and ERP.  One of our newest joint solutions is Siemens & SAP Supplier Collaboration.

In today’s climate, it is our belief supply chain visibility is imperative, no longer is it enough to judge supplier capabilities by a single dimension. Partners must be judged across their full spectrum of capabilities as well as their performance. To achieve this, you’ll need a richer set of business information including financial information, take rates, geographic coverage, quality data, on-time performance, design and engineering excellence, and more. All of this information is critical for you to make more informed and qualified decisions. It will also help you determine how you connect and collaborate with your suppliers which has been shown to have a significant impact on product performance and development efficiency.

With the Siemens & SAP Supplier Collaboration solution, you’ll be able to leverage the power of SAP Ariba to onboard the right suppliers and then manage the full spectrum of collaboration (workflows, access controls, version controls, change and visualization) using SAP S/4HANA and Siemens Teamcenter from pre to post-contract design. Teams can more seamlessly interact and engage with suppliers while balancing the decisions and tradeoffs that are necessary. 

In summary, companies need to accelerate product innovation and link it more effectively into all aspects of business operations, including supply chain, manufacturing, and customer support. Interconnecting these processes and assets is the holy grail and with our newly minted partnership, SAP and Siemens are committed to delivering on that vision and removing the obstacles that cost businesses precious resources and investments.

Want to learn more about the SAP & Siemens partnership? Check out our recent press release, additional Siemens blogs, or watch the video below.

Siemens & SAP Interview Video

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This article first appeared on the Siemens Digital Industries Software blog at