Everywhere you look, sourcing & procurement trends have been adjusting to the “new normal”. Companies are trying to do a thorough assessment of their sourcing & procurement risks and are managing them more thoughtfully. Companies are creating better transparency by working with China suppliers to gain information about their next-tier suppliers and their upstream value chains.
The global and disruptive nature of sourcing makes effective procurement management with suppliers more complex. Making the right supplier selection plays a key role in creating synergy between manufacturers and China suppliers – and this is where sourcing has a role. By fully understanding the sourcing objectives and focusing on the supplier’s core capabilities – along with cost factors – manufacturers can select high-value suppliers with a greater degree of certainty that a long-term and collaborative relationship develops.
Focus on environmental practices will return
Environmental issues may not have been a priority for some firms in 2020, and research showed six in 10 UK businesses lowered investment in sustainability initiatives following the Covid-19 outbreak. However, environmental pledges being made by countries around the world mean that green projects are likely to be pushed front and center by firms in 2021.
To achieve this resilience, organizations must:
- Create cross-functional or cross border teams to deal with supply chain shortages.
- Build additional buffers of inventory and raw materials.
- Develop expected-case and worst-case scenarios.
- Examine additional delivery routes and potential local sources.
- Explore technologies that can help them to diversify and innovate throughout their supply chain.
Be prepared for regulatory changes
It is no surprise that the pandemic will continue to mess with the global supply chain. Countries will continue to impose lockdowns and supply chains will come to a halt. However, organizations will have to be on guard and be prepared for these regulatory changes. Companies will have to monitor international trade and regulations closely and be ready to make changes accordingly.
Procurement will be a smaller, more agile function that partners directly with business units
More activity will take place in the organization’s “virtual center,” EY predicts, and with people who are geographically embedded within business units—thus meeting the need for increased collaboration. “Category managers will also become business partners focusing on all procurement and category needs of a business unit,” it adds. McKinsey’s research makes the point that “In the past several years, at least one company in twenty has suffered a supply-chain disruption costing at least USD100 million. Companies with complex supply-chain networks, such as automotive and technology manufacturers, are especially vulnerable.”
Deciding whether supply risks are worth running is core to procuring goods and services that smoothly match a businesses’ requirement in order to ensure uninterrupted business performance.