According to the Deloitte survey, six months into the pandemic, only half of all procurement leaders had high or very high visibility into their largest (Tier 1) suppliers. And a vast majority (90%) rated supply network visibility as moderate to very low.
The economic impact of the disruption brought about by COVID-19 has equated to disrupted supply chain models, globally. With already so much on their plates, businesses around the globe have been thrown into a combat mode – moving ahead while also having to maintain operations that help recover from the economic turmoil. We also saw the world go online like never before; the sale and purchase of even the most non-consequential item moved online and eCommerce boomed like never before.
Businesses struggled to fulfill urgent demands, counter the turndown on suppliers, and stay operational even when the global supply chains were collapsing. All this – and ensuring the safety and lives of their people and others. Along came the very many varieties of procurement problems and challenges.
Truth be told, a lot of organizations have long been working with legacy procurement practices - ranging from lack of accurate data to lack of transparency. They have been prioritizing lower costs over quality, skipping supplier assessment before initiating business, working with suppliers that do not agree on important KPIs, and not having optimal supplier replacement strategies in place. The traditional procurement procedures and operations simply answered questions about what was needed, in what quantity, and by when. However, consumer needs now have become complex and multi-directional.
What we have seen is how global supply chains were spread and stretched far and wide. Any pull here and there (thanks to the disruptions) caused them to rapture, impacting businesses worldwide to a great extent. Hence, localization over globalization is now the need of the hour, helping shorten these supply chains. This brings local suppliers on the horizon, helping deliver goods quicker and countering procurement woes.
Future-ready sourcing and procurement function
There’s a notable market shift from reactive supplier communication to proactive strategic relationships with suppliers. Companies need to be looking for cost insights that are not limited to the data received from suppliers and product or service specifications. There is a crucial need for organizations to partner with suppliers that offer cost transparency, value, innovation, and global reach. By seeking improved input from category management and insights into world-class supplier capabilities, companies can employ digitized data to support complex and real-time analytics for financial reporting.
Now is the time to revaluate and re-engineer globally integrated supply chains. Organizations need to get in a position where they are able to source goods and services from leading suppliers at the best value while driving efficiencies in procurement operations, improving supplier relationships, and mitigating risks. With ‘Intelligent supply’ in place, organizations can do so at predictable costs; also accelerate innovation; transform the experience of internal customers through automated requisitions, contract management and touchless invoicing; and monitor risk in real-time.
- Inputting customer orders and sales forecasts to identify requirements to meet demand
- Time to break demand into individual components, assessing any sub-assemblies
- Check demand against inventory and allocating resources
- Move inventory into the proper locations and prompt reorder recommendations
- Scheduling production
- Link raw materials to work orders and customer orders
- Get notified of any delays
The course of action has to be proactive. Organizations have to immediately start rethinking their sourcing strategies and build a mitigation plan based on the risk factor involved. It is a great idea to introduce performance-based contracting in an effort to share risk. With a connected digital infrastructure, organizations can collaborate and empower their suppliers to enhance the value they deliver. With planning and resiliency at the core, supply chains can strengthen from the use of accurate data that can help them establish scenario planning.
Businesses need to prioritize working on their immediate and extended supply network and achieving complete visibility therein. Next up, it is time to track, gauge, and demystify the changing patterns in consumer demand. This is crucial for optimizing the existing operating model and make the function of procurement – proactive and future-proof. This is where digital procurement solutions can help them gain the necessary edge. Such digital solutions help provide access to data that was not previously available to organizations. When integrated with organizational strategy, organizations can reduce costs, minimize risks, improve operations, tackle the impact of disruptions, and build an intelligent supply function.