How Will You Weather the Next Storm? Build a Stronger Supply Chain
In the world of procurement, there is always another crisis right around the corner. Time and time again, the industry has been rattled by various disruptions and forced to reconsider how we will weather the storm better than we have had in the past.
Unfortunately, the latest disruptions prove that companies still have not taken the necessary steps to protect themselves from the harrowing impacts of crises like loss of revenue, negative effects on consumers and more. So how are procurement professionals supposed to build stronger, more resilient supply chains that are agile enough to withstand these unfortunate events?
Examine the Past
Crisis can strike at any time, often causing a number of devastating results. Unfortunately, when it comes to better preparation, the age-old adage “history repeats itself” definitely applies. One of the best ways procurement leaders can learn from past mistakes is to be fully aware of what they’re up against.
The last decade alone has presented its fair share of natural disasters that have caused major supply chain disruptions. Earthquakes have resulted in a loss of power to millions and an abrupt pause in vehicle manufacturing. Hurricanes and typhoons across the world have inflicted damage to transportation hubs and caused fuel shortages, while agricultural losses have affected local, national and international product supply chains.
In 2015, the Port of Tianjin in China faced multiple explosions and uncontrollable fires as a result of a lack of proper safety protocols — thousands of vehicles meant for sale were destroyed and several buildings were compromised. In 2016, the new Brexit ruling caused a number of employment, trading and travel regulations to be upended, resulting in a stunt of the U.K.’s economic growth.
It goes without saying that COVID-19 is the largest shock the supply chain industry has ever seen, and it’s still not over. With unprecedented disruptions and a highly increased demand for supplies, in less than two years, this crisis has caused supply chains all over the world to come to a grinding halt and cost the industry an estimated $28 trillion in lost revenue.
Using Data to Protect Against Disruptions
Without plans in place — and the capability to properly execute those plans — organizations will face the same disruptions again. While procurement leaders can’t prevent a crisis from happening, they can create a contingency plan that allows them to weather the storm without experiencing major disruptions. Formulating this plan begins, first and foremost, with good supplier data.
Think about it: Supply chains experience disruptions when the supplier that was intended to provide a good or service is unable to do so. If you have strong supplier data at your disposal, you can develop a plan to replace that supplier quickly before a major disruption occurs.
The problem is, very few organizations have that strong supplier data in the first place. In fact, 72% of procurement leaders are concerned that their supplier intel has not improved since the COVID-19 pandemic, leaving them vulnerable and unable to remain agile. The ironic thing is that 96% of that same group agrees that agility is more important than cost savings.
Improving Data Management
To improve supplier data, procurement teams need to first examine how they’re aggregating and managing data. Too often, they use manual methods — such as web searches and spreadsheets — to keep track of information, but this leaves data siloed and teams unable to quickly find alternative and diverse suppliers.
To improve agility and resilience, organizations need to invest in technology that automatically harvests, analyzes and improves supplier data. This digitization allows for better flexibility so they can easily find the suppliers necessary to maintain a strong supply chain.
Building Supplier Diversity Programs
When planning for crises, a good contingency plan will always include alternative suppliers, routes and production models. No matter how many or few suppliers your organization works with, there is always room for diversification to allow for better responses to any disruption.
Planning to use alternative suppliers is one thing — finding them is another. Using an automated, digital system for supplier discovery can assist procurement teams in finding diverse, alternative suppliers in a fraction of the time compared to manual methods.
Strong Data is the Key to Weathering the Storm
In the procurement world, it’s not a matter of if there will be the next crisis, it’s a matter of when it will strike. By learning from past mistakes and improving access to quality supplier data, your organization will be able to handle the crisis with agility and flexibility and stand strong against disruption.