For the moment, at least, it seems as though the course of the Covid-19 contagion is winding down. Even where its spread seems to be contained, the prospect of a second wave is very much on the minds of both public officials and private business leaders. So how does an organization plan ahead and position itself to be resilient enough to assure its survival in an environment where uncertainty affects every aspect of its operations?
There are two main forces are driving much of what’s happening in the business world today: reducing costs and managing risk. Accomplishing those objectives means different things to different organizations. In some cases, companies have found that they had overextended themselves – entering business segments that were too far from their sweet spot, forcing them to re-evaluate their strategies once the pandemic hit. While in other cases, the pandemic has presented a rare opportunity to advance further and faster on digital initiatives. This thinking is likely to remain post pandemic.
In businesses of every type, budgets for both staff and line functions are being scaled back. IT is a frequent target for these savings, with many projects being either postponed or cancelled. However, one area of technology that appears to be getting a vote of budgeting confidence is procurement technology. Why?
The pandemic created a gigantic disruption in supply chains. Manufacturing companies with supplier arrangements for critical parts and materials, including those with longstanding overseas partners, suddenly found themselves cut off from essential goods. Just-in-time delivery meant they had no inventory of certain essential components on hand – items which they expected to arrive only as needed. On top of that, with just modest amounts of data flowing between suppliers and their customers, there was little visibility into the pipeline of incoming goods and even less into alternative vendors.
Low visibility between customer and supplier can be a particularly thorny problem when the two are physically remote from one another. But as offshoring of supply sources continued to expand over the past four decades, America’s domestic base of skilled workers, coupled with specialized capital equipment, atrophied. Nearshoring, or rebuilding those assets closer to home, has been more a political than practical issue lately. In any case, it would require a very long time and considerable funding to accomplish. Even if that were to happen, and suppliers located closer to their customers, it would potentially trade one type of risk for another; the risk of disruption from international trade disputes would decline, but if a pandemic were to return, both the buyer and seller would be swept up under the same lockdown restrictions.
Implementing an agile supplier strategy requires detailed and accurate data in real time. It is a need that only digital networks linking an organization to its supplier ecosystem can fulfill. It is precisely the sort of information that can enable a manufacturer to identify different suppliers and alternate supplier strategies. In addition to current data, procurement technology layered on the backbone of a company’s digital platform offers automated tools for increased efficiency, cross-savings, decision-making support, and pipeline visibility. It also provides collaborative tools for buyers, sellers, and their respective teams to stay connected and work in tandem to resolve any issues affecting their business relationship.
However, the sad fact is that in many organizations, suppliers can often be an unknown. Meaning there is not always a clear picture of who the suppliers are, what they provide, where they are located, what contracts are in place, etc. This translates to poor collaboration and communication. It means supplier information is often out of date let alone financial health, contingency plans or alternate locations. For companies that grow worldwide through acquisitions, transparency into the supply chains of those acquired companies becomes even more difficult.
While old-school paper-based purchasing arrangements have been on the decline in most segments of the economy, the full implementation of a comprehensive platform to address all suppliers and all spend is only now getting underway. At the same time, however, the contributions to cost savings and risk mitigation that these sophisticated sourcing, procurement or supplier management solutions enable is now being recognized by growing numbers of organizations. Even in times of paralyzing uncertainty, those are two authentically high-value benefits.