Embedding resilience at every step How each stage of the procurement lifecycle can be used to strengthen supply chains
you ultimately select? What weighting is given to cost, quality, supply chain resilience and risk – and does it truly reflect your requirements? Do a deep-dive analysis on those you invite to participate. Understand what lies beneath their supply chains to help evaluate their bids. Try to map some of their supply chain to protect your own from issues and scandals. The initial supplier segmentation needs to take place at the category strategy phase. This ensures you know which suppliers are strategic – based on cost and/or risk – and develop an appropriate approach to their management. But remember that this too, may need revisiting. For example, for many companies cleaning contracts used to be a transactional service. That changed during Covid when hygiene levels were essential to the continuation of some operations. Achieving this kind of ongoing vigilance means giving people the headspace to think and to carry out checks. Reviewing a category strategy may require two to three weeks’ work and can’t be focused upon whilst juggling multiple tasks. To boost the resilience of your team - and therefore operation - give them the support, time and training they need. Try to relieve pressure where you can and be aware that they will be facing it in and outside of work. Build in more contractual safeguards, including clear lines of responsibility but ensure you do this fairly, don’t just dump it all at your supplier’s door. History suggests risk has generally been pushed down the supply chain to the point that it’s not managed – but this doesn’t remove the problem or risk. Be specific and design a process that covers how things will be handled and escalated. Be aware that the risk profile of events has changed. They are occurring more often and having a greater impact because of the interconnectedness of global supply chains.
To boost your supply chain’s ability to prevent or withstand a shock, you should consider ways to strengthen it at each step of the end-to-end procurement process. The good news is, you already have all the tools to do so; it’s simply about embedding resilience into the key stages of the procurement lifecycle: 1. As you develop a category management strategy 2. As you implement the strategy – through sourcing and contracting 3. As you deliver the strategy through supplier management Step 1: Category strategy development • Review business drivers to balance cost against risk and resilience • Re-align category segmentation/ portfolio analysis criteria • Develop strategies that will improve resilience from the start (risk avoidance) First, consider your category management strategy and ask yourself a number of questions. What were the drivers when it first began, cutting costs perhaps or reducing risk, and do those same motivations remain the same today?
Might your current strategy be exposing your organisation to risks that have occurred since it was initially put in place? Perhaps you were following a low-cost sourcing strategy that has consequently led to longer, more complex supply chains, which may have since introduced risk? For example, many companies shifted production to China to take advantage of cheaper manufacturing and labour costs. Yet more recently, some have seen factories – even whole regions – cease production at short notice to try to reduce pollution, leaving those who rely on them scrabbling around for an alternative. Meanwhile, many supply chains in Europe look vastly different since the conflict began in Ukraine. Supply chains should be continually monitored to enable you to respond more quickly to, or even pre-empt, changes. Consider how many links there are in your chains and whether you might be able to reduce them. If you reduce your vulnerability, by definition you increase resilience. In addition to ongoing checks, the pace of change means more formal reviews should be carried out annually, instead of every two years, with individuals held accountable for their performance.
“As supply chains have lengthened they’ve become more complex and exposed companies to greater risk”
Another shifting trend has seen businesses seeking ready-made capability rather than investing in its development. You have a choice to accept the market as it is or shake it up and help the supplier to do more. Investing time and effort into influencing the market and developing supplier capability may reduce your exposure and therefore vulnerability. Yet it’s not always the answer, because new technology could emerge at any time that supersedes your efforts. There is also the challenge of deciding whether you select a best-of-breed supplier or ‘good at a number of things’ provider. There’s been a tendency to consolidate requirements into fewer suppliers – often with good reason, such as cutting costs or carbon emissions – but it can be at the expense of getting the precise product or service you require.
Step 2: Category strategy implementation
If procurement’s role is actually to safeguard the delivery of quality products and services to the business, it’s going to have to stop being tasked with chasing savings. Achieving value for money (VFM) includes protecting organisations from risk and loss through sourcing and contracting activities. To help with this, ensure your supplier selection criteria adequately reflects risk. How are you judging and choosing both those who are invited to take part in the process, and those whom
• Make supply chain resilience a key feature of sourcing strategies and supplier selection • Increase breadth and depth of supply chain risk assessment • Develop more robust risk mitigation and business continuity strategies • Increase contractual safeguards • Develop leading indicators (KPIs) for supply chain disruption
12
13
Powered by FlippingBook