Most global firms will renovate their Procurement and SC strategy
You can read this article in 7 minutes
The world has never experienced this level of disruption in every facet of life. International governments, health authorities and the society, in general, have been taking necessary steps to restrain the dispersion of this pandemic. On the other hand, the epidemic has thought us several lessons to enhance the robustness of our Supply Chains (SCs).
The impact on value chains, nowadays more universal-inclusive-interconnected than ever, only outspread the effects of the pandemic and reveals the lack of ability to reply dynamically during such risky times. The epidemic would fast-track current initiatives to foster SC resilience and edge technologies, for instance, multi-sourcing from diverse countries and dispersing SCs. Experts and supported by the World Economic Forum found:
· Most Procurement, SC operations adopt transportation strategies to assure the continuity of their processes and prioritising orders for critical facilities and vulnerable customers.
· SC executives found that their company’s resiliency scored just 4.8 out of 10 for adaptation.
· The priorities mentioned include the significance of risk management, transparency and communication with suppliers, and preserving people’s safety whilst guaranteeing supply.
· The sudden pandemic took out most executives due to the absence of any detailed planning.
· Businesses’ different measures embrace the protection of suppliers through purchase warranties, an analysis of risks for specific components, and non-essential closing facilities to grant access to national drive and infrastructure resources.
· The need for investing in edge-manufacturing technologies to re-design SCs, like the Internet of Things (IoT,) AI, augmented reality, and automation.
· Organisations must re-outline their external interactions covering more collaboration and enterprise working.
· Innovation and flexibility are fundamental to the company’s enduring crisis.
· In 2021 executives will trim down inventory, avoiding the holding of massive stocks.
· There were many concerns in the warehousing sector about labour constraints, diminished by the pandemic.
Lessons to take away to change Procurement and SC processes
Real-Time Risk Management Governance
SC professionals must get ahead of any crisis quickly. Government delays in seriously dealing with the pandemic caused many deaths. SC leaders must immediately create War Rooms to design worst-case scenarios and real-time decision making. Do not paralyse, act at once! Change quickly any incorrect change or decision.
The value of SC talent
SC represents the decisive factor to level success within a company; it leads the strategic direction and the competitive positioning of an organisation. However, the crisis evidences the sizable claim for SC direction at all levels to lead work teams throughout the situation.
The re-designing of SC staff, Marketing professionals and teams, the design of products, all are describing the level of flexibility to cope with unpredicted events.
A Sole Source is a supplier selected as the only supplier, designated because he/she can individually deliver materials or components, even if there were other suppliers capable of providing such materials. While sole sourcing can grant a viable advantage, or affords lower pricing when supply is disrupted all these advantages evaporate. Do not miss the benefit of sourcing multiple-partakers and consider them into your SC composition, assess operations routinely, your own and of your external suppliers, to quickly react to crises of any kind.
Total Cost of Ownership
It is a Procurement method which brings about all features of doing business with a supplier. It can include lead times, tech value, management, logistic, cost unit price, Accounts Payable terms, cost of quality, and more.
However, enterprises usually outsource goods from distant-low-cost regions, unmasking huge vulnerabilities when problems arise. There is no need to do all manufacturing in the country of consumption. Still, companies should not source only based on the lowest unit price, but in alternate locations to diminishing risk in the presence of any of contingency.
Strategic Inventory Positioning
Inventory is across numerous tiers and channels, and it is the most significant asset and a factor to determine cash flow and RoI. It is time to ponder inventory positioning and to find alternative demand/supply planning models and advanced-digital analytics which are capable options.
Consider strategies like storing up items when the lack of which will bear out life menacing, such as ventilators, medical supplies or other articles fundamental to life.
There is little respect for disaster planning practices even though we are experiencing constant human-made/nature catastrophes highly-predictable like COVID-19; audits, rehearsals, worst-case scenario planning must be taken seriously.
Planning reduces anxiety
Design your SC for a fast-track response in advance of a catastrophe. The ability to quickly change sources or procedures shows your fast adaption to face any critical scenario.
End to End Supply Chain Mapping
A disruption at any tier can bring you whole SC to a close-down. Establish alternative-previously-considered plans to put into action when needed. A crisis is the most stressful experience that could lead us to the taking-wrong decision. Ponder what your alternatives are and have plans in place to perform them rapidly on an emergency.
The Role of Reverse Logistics
It is a central lever when fighting crises. Recovering, recycling, and restoration protect the environment and encourage accurate-sustainable operations. Reverse Logistics can re-establish some level of supply continuity. It will undoubtedly increase your supply levels and buy time until the rest of your supply refurbishment actions take effect.
Invest in Digital Supply Chain technologies
End-to-end electronic connectivity across your entire extended SC gets all information at your fingertips. Combined technologies such as Blockchain, the Internet of Things, Advanced Analytics, Big Data, Cloud Computing, Artificial Intelligence, Augmented reality and more, provide the platform for creating a Digital Supply Chain; the technology that will put you in the best possible position.
Improve your SC accordingly to better deal with any disruption. Undoubtedly, many of these lessons learnt will cost you more in terms of resources, time and money, but it is worth the cost to strengthen your SC.
What additional Supply Chain lessons do you think we need to learn?
David Food is the Strategy Director of Prophetic Technology. He brings a significant breadth of skill, innovation and capability in the use of software and technology to improve supply chains, develop marketing and unlock business potential, whether globally or locally, with collaborative or enterprise-wide solutions.