Supply Chain Procurement Priorities during COVID19 – the Black Swan of 2020

Short Description
COVID-19 illustrates how many companies may not fully appreciate their vulnerability to global shocks through their supply chain relationships.
  • K Gopalakrishnan
Coronavirus

Supply chain has become highly vital to the competitiveness of many companies. But their interlinked, global nature also makes them increasingly vulnerable to a range of risks, with more potential points of failure and less margin of error for absorbing delays and disruptions. A decades-long focus on supply chain optimization to minimize costs, reduce inventories, and drive up asset utilization has removed buffers and flexibility to absorb delays and disruptions. COVID-19 illustrates how many companies may not fully appreciate their vulnerability to global shocks through their supply chain relationships.

 

Procurement Priorities during this event:

To facilitate company’ssuccess and sustainability during this period, procurement professionals must ensure they are adopting the best-in-class solutions for their companies. An obvious goal of any procurement leader is to uncover cost-savings opportunities. However, solely focusing on ways to save money is not an effective approach to supply chain optimization because it has the potential to hurt other critical areas. The following are the four important elements, “4P’s for Procurement professionals that they should prioritize aside from Pricing.

Planning: Risk mitigation planning need to be primary goal of business executives, especially as the elevated levels of connectivity and digitization bring a growing amount of chances for disruption. It is imperative that supply chains can maintain business continuity even at the time of this unexpected event. But it is also critical that they ensure their suppliers can do the same.

Partnership: Supplier relationship plays a pivotal role in the success of an organization during this event. According to a Deloitte global survey, only 32% of procurement executive said they consider their strategic partnerships to be “excellent”. The majority, or 65%, reported that their efficiency in this department is “mixed”. This clearly indicates the need for more companies to improve their relationship management strategies.

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Performance: Another essential responsibility of Procurement leader is to evaluate the performance of suppliers to ensure they are delivering the expected quality and quantity of goods and/or services. The digital environment is making it so supply chains must be agile and adaptive; as their partners. They must also be monitored and measured on their risk and compliance levels. The low cost is not the only factor to consider with procurement because lower pricing can be offset by a supplier that is constantly running into production delays or making late deliveries.

 Process: One of the most effective strategies for procurement and supply chain professionals hoping to lower costs is to improve operational efficiency and streamline production. And making sure the best, more cost-effective process being used is part of this goal. The rapid adoption of automation and digital technologies is providing business with new, better way of enhancing operations. Just about every function of supply chain management can be supplemented with a technological tool or system – from finding and onboarding new suppliers to detecting and preventing risks.

How do companies better prepare to respond to this event?

The companies must build strong relationships with key suppliers and must put systems into place to provide visibility across the extended supply network to better understand their risks and drive specific actions based on their priorities. Develop agility within their production and distribution networks to quickly reconfigure and maintain supply to global demand and must invest in supply chain planning and control tower solutions to better sense and respond, and even predict, supply chain issues.

While COVID-19 may be the catalyst for companies to revisit their global supply chain strategy and accelerate the adoption of Digital Supply Network models and capabilities, short-term actions need to be made to respond to the immediate challenge.From a risk management perspective, the key will be to build a resilient supply chain that not only seeks to reduce risks but also is prepared to quickly adjust and recover from any unanticipated supply chain disruptions that occur.

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