- COVID-19 HAS BEEN THE MOST DISRUPTIVE EVENT TO GLOBAL SUPPLY CHAIN NETWORKS SINCE WWII
- Even more than a year after the initial wave of the pandemic, leaders in the procurement industry are still facing ongoing challenges to navigate their own businesses and those within their supply chains. At first, broken links in upstream supply chains were the most pressing issue for many companies, but downstream problems quickly became prevalent as Covid affected not only businesses, but also families, communities, and social institutions.Procurement has undergone significant changes throughout the pandemic. While the challenges have not subsided, they have shifted, and new opportunities have emerged. As supply chain experts and executives strive to guide their companies forward, it’s crucial to consider both the current climate and the direction of future trends.There are three areas in which changes have already occurred, and procurement leaders should prepare for continued transformation in the future.
- 1. EXPOSED FRAGILE SUPPLY NETWORKS
- Short-term reality: The drive for cost reduction by procurement departments over the past few decades has led to significant weaknesses in supply chains. Many contingency plans were either too slow, too narrow, or unable to scale. Although connectivity has helped to bridge gaps between companies and customers, it’s not always possible for suppliers with pressing capital needs to adopt digital solutions.Long-term outlook: Procurement leaders must not only understand the risks in source markets but also those that individual suppliers face. Modern procurement involves collaborating with suppliers to address challenges and expanding contingencies to cover the entire supply base.Bottom line: Supply chains will become increasingly transparent, and supply contingencies will be more comprehensive and inclusive.
2. ADDED FINANCIAL PRESSURE
In the short term, businesses are facing reduced availability of funds due to the global economic slowdown caused by the pandemic. Fiscal policies are cautious, and many suppliers are still recovering, leading to a high level of volatility in supply networks.
Looking ahead, restricted cash flow is expected to persist during the recovery period of the supply ecosystem. Procurement departments will need to practice precision spending, identify substitute suppliers, and manage internal operations on a tight budget. Companies that adopt automation for manual tasks early on will recover financially sooner and be preferred by supply chain leaders.
In summary, procurement-led innovation in both products and processes will play a crucial role in rebuilding the supply chains.
3. EMPHASIZED HUMAN CAPITAL
In the short term, Covid-19 has made procurement and other departments focus on people more than ever before. Managing supply chains now involves managing human resources to an unprecedented extent, and companies that took a multi-functional approach early on are recovering faster.
In the long term, remote work and digital communication will continue to shape company practices, and procurement operations will reflect this trend. Procurement leaders will increasingly prefer suppliers who prioritize vital support structures for their employees and have a reliable methodology for strategically upskilling their workers.
In conclusion, suppliers who fail to demonstrate a high level of commitment to their internal customers will be replaced by more human-centric companies in the supply networks over time.
ACQUIRING KNOWLEDGE & EXPERIENCE THROUGH TRIAL & ERROR
For many years, a revised approach to procurement has been necessary, and the global disruption caused by the pandemic has served as a catalyst for change. This event has not only exposed weaknesses but also showcased the strengths of companies that have already implemented innovative supply management methods.
As a result of the current challenges, companies will be encouraged to expand, strengthen their supply networks, and recognize the significance of procurement.