When the Covid-19 pandemic hit, it disrupted global supply chains which forced organizations around the world to scramble to react. While there are many lessons learned from the pandemic, especially as we are starting to see the light at the end of the tunnel, it was clear early on that some organizations were better equipped to handle this crisis.
The pandemic created a sense of urgency for manufacturers to be more transparent and agile with their supplier base. One of the biggest realizations was how important having the right technology is and how it is truly a “must have” in order to ensure that supply chains remain resilient and agile throughout a crisis. For instance, oversight and visibility into tier 1 supplier activity is key but the pandemic highlighted the need to do this for tier 2 and 3 suppliers as well. Without this visibility further into the supply chain there is simply a lack of the information and control needed to manage issues once they arise.
The inability to clearly see issues affecting suppliers is being multiplied by the speed with which market forces operate today. Having the ability to respond to rapid marketplace changes is essential, especially something along the lines of a global pandemic. Being blindsided by a supplier’s troubles or limitations can be devastating; maintaining visibility is a powerful and necessary business survival tactic.
Manufacturing supply chains are notoriously complex but heavily depended upon. Over the last few years, procurement teams have been taking on bigger roles that go beyond generating savings. While this is clearly important to restore growth, procurement’s other capabilities are going to be very much needed as well, if growth is to be restored – risk management, innovation, analytics, supplier collaboration, etc. Unfortunately, many procurement teams often lack basic data and information around their suppliers or their spend. The teams that readily have this information are certainly better placed to recover.
Those that took steps to leverage technology for automation, analytics and insights, deeper supplier collaboration, contract automation and more will have the transparency and business agility to ramp up into growth mode when needed. Manual processes and poor data will present barriers.
A renewed focus on risk management
One of the biggest challenges from the pandemic was focused on cultivating a better plan around supplier sourcing and supplier risk management. The impact on supply chains of organizations from the pandemic is well reported and as we move toward recovery, organizations need to shift their focus to really understand and show the importance of their suppliers. Procurement teams must build stronger, deeper and more collaborative relationships with their key suppliers, but they will also need to be agile in how they bring in new suppliers. This focus will help ensure that suppliers are properly managed, developed, can be depended upon and offer the right level of insight to protect against future shocks to the supply chain.
If the pandemic has taught us anything at all, it is that there is a large need for organizations to establish and maintain effective proactive risk management programs. As such, supplier risk management programs are being introduced or re-introduced across many industries but especially manufacturing. Monitoring of supplier risk beyond tier 1 is becoming an important capability that procurement teams must think about. Clearly, not an easy task but with the right processes and technology, it’s possible.
Procurement and supply chain leaders today are showcasing singular resourcefulness and adaptability, though the challenges are far from over. The challenge of restoring growth, while not a new one, is going to be uniquely difficult this time around. One that procurement plays a vital role in. Procurement organizations with a strong data foundation to support effective decision making, the ability to collaborate and communicate with and support all tiers of their supply chain, monitor and track risk and performance and effectively management and develop stronger supplier relationships are going to be invaluable to organizations.