The COVID-19 pandemic has rocked many organizational foundations, and while few could have predicted a disruption of this magnitude, we are now living in a post-pandemic market. Emergency response planning will be a major focus in supply chain risk and Procurement risk management.
How should Procurement course-correct for this “new normal,” while avoiding the urge to overcorrect when addressing new supply chain risks resulting from global disruptions?
1. Segment Your Spend (from a different perspective)
Spend segmentation and analysis are standard Procurement concepts, but this crisis has taught us a few important lessons on how we segment and categorize spend. Sorting into critical, preferred, or strategic suppliers may not be enough anymore.
A critical supplier is a supplier who supports or supplies your core business, and now we must take a harder look at these suppliers who are essential to our supply chain and our daily operations. A short exercise would be to segment all current suppliers who are “mission-critical,” or if they were to cease operations for a day, month, year, how would this affect your operations – for many this should already be common practice. Establish tiers or levels for the criticality of these suppliers and review your relationship with these vital suppliers – now might be the time to consolidate or expand on your relationship. Once you have established your most critical suppliers, incorporate the strategies below to unlock the true value of these relationships.
2. Emergency (or Pandemic) Response
Emergency Response Plans has long been pillars of Risk Management procedures, but few organizations had a pandemic counted among the contingencies. While we don’t advocate for an overly reactive approach, planning ahead for the unforeseen can sometimes be a matter of luck or incredible foresight. But, don’t let that discourage your efforts. Now is the time to review any Emergency Response Plans you currently have and when onboarding any new suppliers, be sure to review theirs – this can become a standard onboarding practices for all suppliers, not just critical or strategic suppliers. Should you receive any pushback on this practice, this may be a red flag that a supplier is not prepared or has inadequate Emergency Response Plans.
3. Focus efforts on implementation
Recent research is showing a shift is top supplier risks and supply chain risk management concerns, with implementation and speed of implementation taking center stage. COVID-19 is forcing many organizations to focus efforts on implementation procedures. Now is the time to reconsider a supplier’s ability to properly implement and the speed at which they can perform. Crises like this should cause a re-evaluation of our supply chains and suppliers, forcing many of us to onboard new suppliers. Pay attention to the pace at which a supplier on-boards and ramps up – this may be an indication of how prepared they are for worst-case scenarios.
4. Build Better Relationships
Now, more than ever, we are seeing the importance of communication, especially the importance of communication with our suppliers. Supply chains are dealing with confusion surrounding shipping, particularly around imports and exports, so it is critical you have open communication with your suppliers to better understand any gaps in the supply chain and help to remediate when and where you can. Strong communication between you and your suppliers will help enable transparency, and limit any surprises that might be a result of broken supply chains – this could mean planning for a delay rather than reacting to a delay.
5. Plan for Post-COVID
Undoubtedly, our collective focus is on the disruptions of COVID-19 and the effects it has had on our supply chains, but it is important to plan for what’s next. Prepare to return to “normal” operations as we see operations begin to pick back up, but, also continue to function in our current “new normal.” The steps and actions we take as a result of the disruption of COVID should become an integral part of our Risk Management. We are planning for the unknown as best as we can – and that means learning from our experiences during this current unprecedented disruption.
Check out Corcentric’s website for more information about Supply Chain Risk Management.