After three years of chaos, the pendulum is finally swinging back to favor the basics of supply chain management.
We are seeing large tech companies laying off thousands of employees, while others are streamlining operations, redeploying supply chains and preparing for the inevitable economic expansion.
For those who entered the profession during the height of the pandemic, this move may be a new learning experience. But for those of us who are supply chain veterans, we knew this day was coming. It always does.
Going “back to basics” doesn’t mean ditching the newer technologies that streamline procurement processes and allow industry players to make good analytical decisions. Instead, I'm talking about embracing the foundational building blocks of procurement and supply chain management, especially in an increasingly volatile economy.
Those procurement and supply chain organizations that embrace this change will offer a competitive advantage to their companies. So, what exactly are the basic building blocks?
In our current inflationary environment, we have seen the cost of materials and services rise rapidly and often without supplier remorse or justification. It is time to have hard discussions with suppliers about their plans to manage future price increases, justify old ones, and provide a plan for price reduction.
In the past several years, gaps in the supply chain had put cost management on hiatus as we chased parts around the globe. We need to dust off those negotiation skills and have a heart-to-heart with our suppliers. Or, in this environment, find more competitive ones.
The relationships we had with our suppliers has changed since entering the pandemic, and we need to acknowledge these changes and revisit our across-the-board sourcing strategies. Some suppliers will make the cut, and some may not.
Seeing as strategic sourcing strategies must reflect the present environment, not one from several years ago, your supplier may feel the same way. But be prepared for some of your suppliers to give you the boot. With everything in play in this new environment, it is imperative to be proactive.
The “Supply Chain Shuffle’ is not a kid’s birthday party game but an ongoing redeployment of supply chains across the globe driven by macroeconomic and political issues.
There remains a high level of uncertainty and risk to the supply chain. Procurement professionals can help mitigate risks by identifying alternative suppliers, ensuring continuity of supply, and implementing contracts and agreements that protect their company’s interests.
Pay attention to current events and watch what the big companies are doing around supply chain issues in China and Europe. They are often first movers.
Supply Chain Optimization
We are all certainly aware of ongoing disruptions in the supply chain. Procurement professionals can continue to optimize the supply chain by identifying opportunities for supplier agreements, managing lead times, and streamlining procurement processes.
Be ready to respond quickly to changes in the market. We’ve learned that broken supply chains don’t heal by themselves.
Organizations need to have visibility across their entire supply chain, including suppliers, inventory levels, and transportation routes.
Building in resilience can help identify potential bottlenecks, risks, and optimization opportunities. Be prepared to map out all critical supply chains going forward and have contingency plans for disruptions in service, quality and cost.
Collaboration between suppliers, customers and other stakeholders can help ensure continuity of supply and minimize disruptions. This involves sharing information, coordinating production schedules and working together to solve problems.
Reintroduce yourself to your supplier community and reset expectations. By reaching out, whether via video call or an in-person visit, showing up indicates urgency and commitment.
Compliance with regulatory requirements and industry standards is critical in a volatile economy. In turn, it’s important to brush up on industry standards and changes and ensure that supply chain partners are complying with all relevant regulations and standards. Pay attention to recent legislation that impacts supply chain issues.
Professional procurement is essential in a volatile economy as it can help manage costs, mitigate risks, optimize the supply chain, identify new opportunities and ensure regulation compliance.
By leveraging your expertise and experience, you can help your organization navigate the challenges of a volatile economy and emerge stronger and more resilient.