We hardly need to mention the impact COVID-19 has had on the procurement and supply chain sector. In fact, Fortune reported in February that 94% of the Fortune 1000 companies had already experienced supply chain disruptions due to COVID-19. As the world adapted to the crisis - to restrictions in movement and global factory closures - we also saw the unprecedented impact of systemic shocks in demand, most notably in toilet paper, with consumers buying a months’ supply in a single day.
In a world where such everyday forecastable products can plunge supply chains into chaos, how can procurement and supply chain professional adapt post-COVID-19? From diversification in sourcing to digitally transforming processes, we look at some possible solutions.
Identify opportunities to diversify supply chains and product sourcing
Global supply chains are fragile, and these vulnerabilities have been exposed by the current health crisis. We have seen this exemplified in the healthcare sector and how unprecedented demands for PPE have highlighted the risks of using a small number of suppliers in an effort to control costs.
There is an urgent need to develop stronger and more diverse supply chains and more robust demand plans. Though as the extent and duration of restrictions on movements are currently unknowable, this adds a further level of complexity to diversification strategies.
While we brace ourselves for further developments and news of whether product demand will return to a normal baseline, or if we’ll experience further surges in large-scale buying, smart businesses should take a close look at their supply chain and identify opportunities for diversifying product sourcing. This could include identifying opportunities for new partnerships or collaborations. Procurement professionals would also benefit from looking beyond transactions and refocussing their strategies on the whole of their supply chain and production capacity, long-term.
The impact of factory closures in Chinese factories highlighted the need for greater flexibility in company’s supplier base. Rather than relying on one source, or one country in the future, businesses could consider extending their reach to manufacturing hubs in countries such as India, Vietnam and Mexico. Or even looking to localise production and sourcing - bring the supply chain closer to home.
Adapt invoicing and payment processes
One of the key impacts of the current health crisis on procurement and supply chain is increased processing times to settle invoices. According to Tradeshift, businesses took an average of 36.7 days to settle an invoice in 2019, compared to 36.8 days in 2018. In the first quarter of 2020, average payment terms have risen 1.7% to 37.4 days.
The lack of orders currently going through the supply chain is likely to create an additional impact. Since March 9th, the average weekly order volumes on the Tradeshift platform dropped by 15.9% with invoices dropping by 16.7% during the same period. While we wait to find out how future developments will impact the markets we operate in, businesses should consider any activities or measures that will help mitigate the effects of these delays and disruptions.
Find opportunities to digitally transform processes
Digital transformation in some areas of procurement and supply chain has been rather slow to evolve and the relationship between buyers and suppliers remains predominantly paper-based. In short, it’s outdated. By digitising this relationship, businesses can build more robust supply chains and make sourcing new suppliers far less costly and time-consuming. Businesses can also harness the power of AI and IoT technologies to mitigate future disruption.
Digital transformation activities can also be used to simplify and streamline tender and bid processes. OpenOpps is a free platform that has been brought to our attention recently. It’s a free platform which aggregates data on tender opportunities worldwide and aims to help buyers find suitable suppliers when their usual vendors are unavailable. It even has a suite of tools designed specifically to help businesses during the COVID-19 crisis.
Identify new opportunities for collaboration and innovation
Good supply chain and procurement professionals recognise the benefits of collaboration. And now is the time to accelerate these efforts, both for the good of our businesses and to play our part in the global recovery.
No doubt, you’ve seen inspirational stories in the media of manufacturers pivoting businesses to respond to shortages in life-saving equipment. Distilleries making hand sanitiser and fashion designers producing face masks, to name just a few examples. Naturally, not every business will be able to down tools and pivot in this way. But it is worth considering what we can do, as individuals and businesses to be part of the solution.
As we all know, this is only the beginning of the discussions our industry will need to have around COVID-19. We are a resourceful sector and many companies are already proving how adaptable they can be during times of hardship and instability. We must rethink and re-evaluate the accepted global models and supply dependencies. We must prioritise digital transformation and learn from the mistakes and the successes of their peers. Perhaps most importantly, we must continue to build bridges and work together to make the recovery as swift as possible.
The team at Bramwith are always here to support our clients and candidates. If you need any assistance with digitally transforming your team or if you have any recruitment requirements, please get in touch.
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