The global pandemic has refreshed the focus towards the importance of procurement and supply chains in any given industry.

Traditionally, unfortunately so, this area has been neglected, not properly understood and never thought worthy of strategic importance. Mostly considered tactical in nature that keeps the lights on, in the background hidden behind the glitz and the buzz of likes of more glamorous departments i.e. sales & marketing, etc. since they are considered the revenue generating and customer front ending ones.

 It is today the industry is looking back to their supply chains with hope to provide them the ability to pivot and help them survive the deluge.   

Here are a few facts to underscore how far back it was pushed – 

• Until recently, there were hardly any courses that specifically taught Supply Chains/Procurement related content.
• 90% of the procurement executives happen to be in procurement related functions by chance and not choice.
• Most corporates reserve (if at all) 0-2% of the annual training budgets for Supply Chain/Procurement function.
• Most corporates do not even understand the risk they are exposed to, if their procurement teams do not have legal sharpness to understand & negotiate contractual terms; as most times procurement and legal are departments at loggerheads. That eventually makes legal a “check box” and procurement a “paper pusher” with no authority to negotiate contractual terms. A perfect recipe for half baked contracts to fall through the cracks.    

Furthermore, a global scale pandemic like this has impacted most sectoral supply chains, causing immediate stress to all stakeholders involved – directly/indirectly - negatively. Once, the supply chain is stressed beyond its elasticity; it may cause it to breakdown i.e. its participants no longer have a common cause to work towards (each to his own e.g. migrants going back to their native lands). At that point, the supply chain loses its ability to respond for a quick recovery, even if there is a quick demand uptick/turnaround.      

Sector wise Impact(s) Examples:

FMGC – Migrants returning to their native lands causing a labour crisis even though there is demand.

Commercial Airspace & Travel – High Impact; International Travel ban in 130+ nations; near term cash flow & longer-term growth uncertainty.

BIFS – High Impact; global unravelling of leveraged positions, repricing of insurance underwriting by re-insurers, inversely proportional relationship between lockdowns & economic recession cause delay in actions by third world countries helping the pandemic grow worse, inter-currency relationships becoming unhinged. Global cost due to the pandemic is estimated to be approximately USD 3 Trillion in addition to the cost of life lost.

At this time, businesses have come to realise that their supply chains are critical to their absolute survival.

Unless their SCM responds, the factories halt productions, operations stop, no new products roll out of the assembly lines, marketing does not have pricing issues on their desktops, sales do not have SKU’s to sell, customers will not have any complaints as they do not see your products anymore, no new purchases, no profits, no salaries…      

 The post-pandemic world will look very different than what we’ve known it as and may result in some permanent changes to the way in which global supply chains operate creating a new normal in the way how business is done. Some business models, even industries, will completely disappear and others with new innovative business models (or ability to pivot quickly enough) will thrive. This is going to be an inflection point, that world has rarely seen. No longer be just plan B be deemed sufficient, but plan C & D will be required to be mapped.

Business Continuity Planning will require to be re-looked in its entirety. In SCM, Know-Your-Risks (KYR) will become the new buzz-word acronym. Most Supply Chains were negatively surprised due to risks from their tier-2/3 i.e.  “invisible suppliers”, those were aggregated in a single country. No more!

Understanding of SCM risks and risk mitigation (including health hazard scenario) strategies will become intertwined to running any business successfully.       

Remote work technologies will be the new normal; not an optional choice anymore. Business travel preflight health checks will become routine.

Companies should strive to keep their supply chains alive and functioning, albeit with lesser volumes for the time being. Few immediate actions that should be taken – 

• Keep the team motivated towards common purpose; Be trustful!
• Leverage the lowest hanging fruits with most impact.
• Supply continuity is more important than best price. Stay alive!
• Innovate to stay ahead of the curve; keep your head above the water.
• Don’t compromise on the quality; stay away from profiteering. 
• Use Technology for speed & economies of scale to keep prices low.
• Find local sources for supplies, lean on small suppliers. Return the favour, when things get better!
• Create a moat to be able to sustain & survive the next epidemic.  
  Source responsibly; keep it green.
• KYR – Know Your Risks, even if we cannot mitigate all of them; just understanding them is a great head start.
• Sharpen your edge; train, learn, unlearn, innovate. Sensitise the critical function employees to the realities of the new normal.  
• Look at allied things that can be done to help the cause i.e. manufacturing factories can help build ventilators, a distillery can jig up a sanitiser making set up, etc.
• Work towards developing your pivot to grab the opportunity when the time comes, mark your time of action.  

Leverage the supply chain teams as internal consultants/agents of change in order to accomplish the following: 

• Collaborate – Internally & externally
• Communicate – Both potential risks & good news
• Prioritise – On the basis of positive impact to the most.
• Trust your team – Make them aware of the end goal
• Own up tasks - see them through to completion; at each level
• Leverage technology - where you can to speed up or simplify 
• Lean on your professional relationships over the years to get work done 

Smart companies will have the oversight to utilise their Supply Chains as strategic pivots, successfully. Here are a few steps to make them more resilient going forward -    

• Review & Update the Know-Your-Risks (KYR) components;  
• Simulate global crises and the readiness of their Supply Chains; 
• Create Local suppliers Globally (GLocal) supplier presence & backups while managing them centrally;
• Procurement departments remain woefully short on training on trends, technologies, skill-sets, industry awareness and legal/contractual impacts due to such global events; exposing organisations to huge potential risks.

 Some of the recent examples with existing businesses pivoting to help fight the pandemic which would not have been possible without active participation of their supply chains i.e. Rolls Royce, Dyson & Mahindra’s leveraging their manufacturing to build ventilators; Louis Vuitton making Hand Sanitisers, Live in Dior and Givenchy Soap Bottles; Godrej, Unilever & Patanjali working together to reduce pricing of their hygiene products, etc. 

The above is the proof that with enough trust, support & focus the supply chains and procurement function have the ability to deliver in these tough times and see their organisations weather the storm.   

RELATED TOPICS:#supplychain,Procurement,Post Covid,Gaurav Kumar