Future-Ready Procurement

The past few years have not been kind to global supply chains. The sudden shocks and shifts that the world has been experiencing geopolitically, environmentally, economically, and pathologically, among others, have served to slow down and, in some instances, incapacitate global trade. There is a growing sentiment of being in a state of permanent crisis for most organisations, and building greater resilience into operations is a key agenda point in boardrooms around the world.

Almost half of some 300 supply chain leaders surveyed globally thought that their supply chains are vulnerable to disruption. This is due to a myriad of challenges ahead of them, including increased costs and availability concerns in relation to transportation and raw materials with geopolitical uncertainties likely to cause even further disruption to trade.

With this in mind, Axis Group looks at 5 key themes which leaders and their procurement teams should be addressing to make their business future-ready.

1. Digitalisation

In a world where supply chains are becoming increasingly complex and global, and consumers demand sustainability, it is critical for procurement teams to have visibility into every aspect—and every node and tier—of the supply chain. This means leveraging digital tools and platforms to track supplier performance, monitor inventory levels, and identify potential bottlenecks. This means looking at AI and how it can be used to improve operational and supply chain efficiencies, essentially transforming the way business is done.

According to an industry survey of over 1,000 global supply chain decision-makers across the US, UK, France, and Germany, 28% of supply chain leaders are concerned about a lack of sufficient, reliable transportation/shipping capacity. Continued shortages of critical parts or other goods are a concern for 33%, and uncertainty in customer demand is a worry for 27%.

Tackling these challenges will require gaining visibility on your end-to-end supply chain, and realistically speaking, given the complexity of today’s global supply chains, embracing digitalisation is the only truly viable way there.

With climate change and disruptions of all kinds impacting production and fulfilment rates, procurement must be proactive and strategic in their digitalisation strategy in order to best mitigate risk by gaining greater visibility into their movement of goods and bringing transparency to their lower-tier supplier base.

Gaining end-to-end supply chain transparency is a critical step toward both Scope 3 emissions reporting (all indirect emissions not reported in Scope 2, including those that occur upstream and downstream) and uncovering possible human rights violations in your lower-tier supply base.

Although leaders are rightfully concerned about the challenges of implementing technological solutions, those slow to leverage digitalisation will lose competitive advantage and will remain unable to withstand disruption and protect their brand.

2. Talent

Procurement teams will need new skills and the current roles will need to be reconfigured. To close the skills gap and remain competitive well into the future, procurement must partner with HR to create a forward-thinking procurement talent development strategy that aligns with the critical skills needs of tomorrow.

Procurement teams must be staffed with the right talent that can spearhead (or at least actively partake in) digital transformation and change management initiatives. This means creating a talent strategy that focuses on recruiting, training, and retaining employees with the skills and expertise needed to drive procurement innovation and growth.

Alongside digital prowess, as organisations begin to work collaboratively with suppliers and drive innovation and continuous improvements and foster strategic relationships, companies should prioritise seeking talent with superior social or “soft” skills.

Now is the perfect time to get your stakeholders onboard and highlight the need to fill your procurement talent pipeline with professionals with skills in supplier and stakeholder management, communication, complex decision-making, and business ethics. If budget is a concern, consider low-cost talent development approaches such as job rotations, virtual job shadowing and mentoring, which are great ways for employees to gain the necessary hard and soft skills.

3. Supplier Relationship Management (SRM)

Strong supplier relationships have always been critical to the success of any procurement strategy. However, post-pandemic companies are now aware that cost-focused procurement is limited in the value it can deliver and may leave a company vulnerable to disruption and lagging in competitive advantage.

Today, SRM is at the heart of procurement’s shift from cost to value extraction.

By taking a more holistic, value-driven mindset that emphasises long-term partnerships, innovation, and growth for the betterment of both parties and the environment, organisations can optimise results and meet the entirety of organisational objectives.

Working more collaboratively, suppliers and buyers can unlock new sources of value, drive innovation and product development, redesign more efficient processes, remodel more resilient supply chains, reduce waste, eliminate redundancies, and even pool and optimise their collective purchasing power. Further opportunities include improved capacity management, forecasting and sales and operations planning to improve service levels and mitigate operational risks.

To get there, procurement teams must re-engage with suppliers, reset expectations, and focus on building long-term partnerships that are based on trust, collaboration, and mutual success.

4. Agility

In today’s fast-paced business environment, where disruptions can occur to either supply or demand at any given moment, agility is key. Procurement teams must be able to adapt quickly to changing market conditions, fluctuating customer demands, and the now omnipresent supply chain disruptions. This means having the flexibility to adjust procurement and inventory management strategies on the fly, leveraging data and insights to make informed decisions and meet changing demands while taking advantage of improvement opportunities.

To gain an understanding of your agility and where there is room for improvement, try answering the following questions:

• How fast can your supply chain react to changes in demand or supply?
• How much change in demand or supply can be absorbed by the supply chain, and within what time period?
• How quickly can you design, produce, and distribute a new product?

New product introductions, short lead times, varying volumes, and a geographically diverse supplier base can all bring added volatility and complexity when trying to build agility and must be strategically managed. For this reason, agility must be a corporate-wide objective, ensuring your executives and their actions are all in alignment.

5. Risk

Finally, 2023 saw a magnitude of risks from geopolitical conflicts to rising raw material & energy costs to fluctuations in global demand. With such supply chain risks on the rise, procurement teams must proactively identify and mitigate them. This means developing a risk management strategy that focuses on identifying potential threats, assessing the probability of events, analysing the potential impact, and setting a formal action plan to reduce time-to-action and minimise disruption.

However, supply chain risk management is a highly complex process that faces significant challenges, mainly:

• Gaining supply chain transparency is difficult due to the complexity of modern supply chains and the hundreds or thousands of suppliers involved.
• The scope and scale of risk require a vast amount of resources to tackle while analysing the likelihood and severity of risks can be extremely difficult, if not impossible, to ascertain, thereby impeding your ability to quantify, address and appropriately mitigate. For example, how many employees fail to follow cybersecurity best practices and how often, creating a vulnerability point for cyber-attacks? Can you see into the Nth layer of your supply base to identify concentration risks?
• Proprietary information (such as product formulations and raw material suppliers) often restricts progress, limiting visibility into your Tier 2+ suppliers.

Again, there are technological solutions that can help with these challenges, allowing you to monitor your movement of goods in real-time, helping you map your multi-tier supply chain, monitoring areas of risk, setting risk tolerances, and providing warnings if they come within reach, and even prescribing action plans, with push notifications sent to your inbox.

By digitalising the process and minimising the time required for suppliers, you may also have more luck in gaining their cooperation in your risk management efforts.