There is an underlying problem within procurement teams—a lack of agility.
As the recent pandemic has shown us, nearly all supply chains worldwide were affected by the disruptions brought by these unforeseen circumstances. The lack of preparation and adaptability of procurement operations is alarming, especially since procurement is a foundational pillar that directly affects business revenue.
Case in point, as a procurement manager, your responsibilities include:
- Addressing the needs of internal stakeholders
- Aligning sourcing with corporate financial goals
- Considering the capability and requirements of suppliers
- Building relationships with suppliers and stakeholders
- Responding to the dynamic market changes worldwide
These responsibilities directly affect business growth and stability, and yet, are being manually done with spreadsheets, email threads, and verbal conversations. Then, out of the blue, COVID-19 entered the scene and challenged procurement teams to adapt fast. It’s no surprise that many organizations suffered due to:
- A shortage of available supply due to production downtime and shutdowns
- Complications with logistics and transportation due to slowdowns and delays
- Lack of flexibility and agility to adapt to immediate changes
While these vulnerabilities were present even before COVID-19, they were certainly brought to light when pandemic-related supply chain disruptions began to unfold.
Thankfully, there is one saving grace, and that is to use technology in your procurement processes. By using strategic tools to help protect business growth and build a resilient supply chain, your procurement team will be agile enough to manage even the most devastating disasters.
In this article, we’ll discuss how agile technologies can help your procurement team thrive in the ever-changing, post-pandemic landscape.
Situations Where Technology Solves Procurement Challenges
We’ve already mentioned some problems that supply chains experienced when the pandemic hit. However, they are but indications of the greater issues that procurement teams face. So, below are four of the most prominent issues that the pandemic aggravated, and how technology could have helped:
China’s manufacturing industry caused global panic when it briefly suffered, resulting in the disruption of 94% of the world’s supply chains. Because of this, many wondered if it was still smart to hinge all their sourcing needs on the world’s leading manufacturer.
At the same time, they also realized the need for maintaining a 360-degree view on their suppliers, using technology to gain relevant and timely information such as:
- Internal performance evaluations
- Third-party providers of financial risk data
- Information from each supplier across various categories and tiers
With the right technology, you can unify and collate supplier records across these sources for accurate reporting and faster decision-making. The right tools allow every supplier (sub-tiers included) to upload their certification and ongoing data, permit third parties to submit comprehensive overviews, and help your team to identify potential issues proactively.
More importantly, technology helps you map sub-tier suppliers for in-depth visibility. Such ability is crucial to have, especially if you have tier-two suppliers in other countries.
For example, five million companies (938 of which are in the Fortune 1000) had tier-two suppliers in Wuhan, China when the pandemic became a worldwide threat. Since nobody was prepared to oversee the sudden disruption, their businesses were greatly impacted.
Accelerated Supplier Onboarding
The pandemic also revealed the need for hastening the onboarding of new suppliers. Due to factories going bankrupt, shutting down, or dealing with nationwide lockdowns, many procurement teams needed to find new suppliers at lightning speed. And they had to do it all while upholding the highest quality and proper screening.
With technology, procurement teams can do the following:
- Significantly cut down the time it takes to identify new suppliers
- Make it easier to improve qualification
- Use matchmaking capabilities to find suppliers that meet strict requirements
- Provide information for faster vetting processes
- Ensure a minimum qualification for rushed situations
- Accelerate the onboarding of new suppliers with self-service procedures
For example, our bespoke sourcing platform oFlow reduces friction in the supplier onboarding process by extracting from our network of sustainable suppliers. With technologies such as this, you can ensure that your end customers receive the right order and quantity at the right time—made possible through onboarding new suppliers efficiently.
Financial Stability of Suppliers
It’s not just the organizations that were affected—even the suppliers themselves experienced financial instability during the pandemic. A report from Riskmethods showed that supplier financial risk took up nearly half (48%) of all risk events in 2020. Supply Management further emphasized this by stating that suppliers’ financial risk is the “biggest threat to supply chains.”
Moreover, there was a double-digit increase in insolvencies worldwide, with more than 100,000 companies completely closing down. We can safely assume that these statistics include manufacturers and factories that couldn’t hold their ground during the pandemic.
Given the economic downturn, procurement teams need to pay attention to liquidity and the ability to change payment terms when required. Fortunately, technology can help by doing the following:
- Establishing a system that has data from third-party resources on supplier finances
- Providing predictive risk scores for suppliers’ likelihood of default
- Accessing relevant information and notifying of any changes
- Allowing procure-to-pay solutions for increased payment control and flexibility to optimize cash flow based on your organization and your suppliers’ situations
As consumer demand continues to grow, you need to ensure that the factories and suppliers you work with have the financial stability to keep up with the market pressure.
Increased Importance of Sustainable Sourcing
Ironically, as the COVID-19 virus spreads like wildfire worldwide, the environmental impacts were far different. Many cities saw a decrease in air pollution, and animals reappeared during the forced lockdown measures. Locals in Punjab, India, could finally see the Himalayan peaks and pink dolphins returned to their home in Hong Kong. Nature thrived in the year 2020, which resulted in 60% of consumers dramatically committing to sustainability since the start of COVID-19.
Fortunately, there is technology available that can help you adopt sustainable sourcing practices in your procurement strategies. For example, technology can:
- Provide information on the sustainability practices of your suppliers
- Ensure that your suppliers are following your corporate CSR and ESG goals
- Improve supplier collaboration by enabling secure sharing of product data
- Allow automated improvement plans for specific targets and performance monitoring
- Facilitate seamless communication among internal and external stakeholders
Consumers care about how your company sources, so much so that 37% of them will consider the product’s environmental impact before purchasing. Therefore, you need to work with suppliers who align with your sustainability concerns—especially those you’ll plan, develop, and improve existing and new products with.
From these four factors alone, we can see how technology addresses procurement vulnerabilities and makes your supply chain resilient to any drastic changes that will inevitably happen in the future.
Strategic Sourcing for Resilient and Agile Procurement
As the pandemic further affects businesses all over the world, supply chains across all industries and countries need to implement new strategies that strengthen their procurement processes. The worldwide economic disruption seen recently has revealed plenty of opportunities for supply chains to improve their sourcing and procurement ways.
As a procurement manager, the potential to boost efficiency, supplier collaboration, supply chain agility, and increase bottom line profits should undeniably compel you to invest in new technologies.
So, are you interested in getting started with agile technology?
Our team at Good for Life helps procurement teams implement agile technology for a resilient and seamless supply chain. With our custom-designed system oFlow, we bring a customer-centric approach to identify, work with, and manage all your suppliers from one dashboard.
Get in touch with our team today for a quote!