On February 22, 2020, a German global manufacturer of tractors received an early warning alert, regarding a rapid increase in the number of infections in Lombardy, Italy: „Attention, it could be that your supply chain in this region is going to be interrupted.“ Three days later, the first supplier in the affected province of Lombardy, which produces electronic components that are essential for tractors, had to shut down its production due to COVID-19. Only then did the manufacturer inform its customers. It was a three-day head start for the German tractor builders and worth a lot of money, since they had already identified an alternative supplier long before the competition.
The early warning was sent by riskmethods, a company headquartered in Munich, Germany, which monitors and identifies all types of risk in supply networks and, above all, helps its customers to prevent and reduce negative impact to their supply chains. Using AI and machine learning, riskmethods scans and integrates millions of data sources for relevant threats in delivery networks, enabling companies to identify dangers as quickly as possible, assess the impact and proactively collaborate with suppliers to mitigate risk.
riskmethods began its business operations in early 2013. The two founders, Heiko Schwarz and Rolf Zimmer, experts in supply chain management, found that there was no automated solution to identify risks in the supply chain, let alone how to handle these risks. From their own experience, Heiko and Rolf also knew that companies needed to shift to a proactive risk management approach – unthinkable with the de facto industry standard, which is usually based on spreadsheets that are updated once a year. What companies really need is reliable real-time information and trusted facts, such as a location’s risk of flooding or earthquake, the possibility of strikes, whether child labor is an issue, or if a supplier is pouring chemicals into a river. Such facts must be researched continuously because they are subject to constant change.
One aspect of risk is that you don’t really know from where it will materialize. So, the only way to really deal with the unknown is to start on the web as broadly as possible using semantic search methods for terms such as storm, tornado, hurricane etc. Heiko Schwarz: “You want to get a lot of hits, the search must be wide. But then you need filters that classify these hits and assess them precisely. Due to the sheer mass of data, doing this manually is impossible. We calculated that we would need around 40,000 people to monitor 500 suppliers of a single smaller customer. However, our customers have an average of 2,000 suppliers!“
Luckily, when the founders started riskmethods, the required technologies – especially AI and machine learning – just became mature and, above all, affordable, as Heiko Schwarz says: „It was immediately clear to us that this is an ideal problem to solve with AI“.
And the story doesn’t end there: According to Heiko Schwarz, a tough nut that has not yet been cracked as part of risk management, is so-called sub-tier visibility. Companies usually only know their direct suppliers. But who is the supplier of the supplier – or even their supplier? After all, a large proportion of supply chain interruptions are not caused by your own suppliers, but by the levels below. This lack of knowledge becomes a problem when a company may purchase the same products from three different suppliers in order to minimize the single-source risk, but the three suppliers obtain their goods from the same source.
When Alexander Buchberger, partner at Senovo, first heard about riskmethods, he was quickly inspired. Based on his prior experience at Siemens, he was well aware of the potential to reshape modern risk management and the significant impact this will have on companies with international supply chains and high volume manufacturers. Alex and the founding team clicked right away and that sealed the deal for Senovo and their investment in 2014.
These days, riskmethods has 160 people on its team, with offices in Munich, Germany, Boston, U.S.A. and Wroclaw, Poland. The company recently hired Patrik Heider as its CEO, a results-oriented executive with an excellent track record, whose aim is to maintain the startup style growth and culture as the company grows into the larger organization typical for global market leaders.
No wonder Alex is pretty relaxed these days when you visit him at Senovo’s office in Munich: “Investing in a startup is like raising kids. You go through all phases of life and now that the company is a mature scale-up in the hands of very capable founders and management, you can start to look back and think what a thrilling ride it was.”