Repeated supply chain disruptions have put an immense strain on businesses over recent years. Global conflicts have interrupted critical supply routes such as the Red Sea. Geopolitical tensions are leading to additional tariffs on companies doing business with the likes of China, Russia, and Iran. Add the harsh realities of lingering inflation and higher energy costs to the mix, and businesses have their work cut out navigating an increasingly complex and volatile global landscape.
The UK is taking action, with the 2024 supply chain strategy. This legislation aims to boost collaboration between businesses and the government to help relieve pressure and resolve disruptions quickly.
However, procurement leaders can’t afford to wait for these initiatives to come in. Disruptions can stop a business in its tracks. A serious event can prevent a business from providing goods or services. It can raise costs and damage customer relationships. To avoid them, procurement leaders must act to restructure their supply chains and increase their resilience.
Completing the transition to the supply chain of the future necessitates building agility and resilience into businesses’ supply networks. But what steps can they take to achieve this?
Ensuring supplier diversity
Firstly, businesses need to change the makeup of their supply chains, ensuring they have a diverse portfolio of suppliers to mitigate the impact of geopolitical, regulatory, and environmental risks. This approach may require adopting tactics such as on-shoring and near-shoring to bring suppliers closer to home.
Recent research has shown that 46% of businesses have switched to on-shore and near-shoring methods to minimise the impact of disruptions.
However, while bringing suppliers close to home can reduce risk from far afield, businesses must be wary of placing too many eggs in one basket. If disruption hits a region where most of their suppliers are located, operations will grind to a halt.
Kickstarting supply chain recovery
To foster agility and resilience in the supply chain, it is essential to build a better understanding of pre-existing suppliers. Businesses must learn from previous disruptions, putting the right processes in place to identify future risks and be able to spot potential suppliers that would be affected by disruptions – including tier 2 and 3 suppliers, where the risk is highest.
Businesses also need the flexibility to identify and onboard alternative suppliers for critical goods and services, should an existing supplier fail. This means implementing supplier contingency plans which include identifying alternative suppliers, so firms are not forced to scramble when disruptions occur.
Visibility for supply chain stability
By using cloud-based solutions to gather supplier data into a single, Source-to-Pay platform, businesses can make procurement smarter, enabling them to map suppliers, identify areas of risk, and ultimately gain a 360-degree view of the supply chain.
Increased visibility will ensure a single source of truth for all supplier information, including performance, risk, orders and much more.
Businesses can use this information to streamline two-way communication with suppliers, as well as other internal stakeholders. This is essential for more strategic collaboration. For example, buyers can notify suppliers of planned orders or forecasts ahead of the actual purchase. This will help suppliers to prepare for larger orders or reduce their unnecessary inventory.
On the other hand, suppliers can share information from their side too, notifying buyers of any advance or delayed shipments. And increasing data sharing between the business, suppliers, and stakeholders will also produce benefits elsewhere. For example, sharing data can drive improvements in ESG and offering the ability to co-innovate on new products and services.
Businesses can also bolster their supplier visibility and communication efforts by utilising the latest advances in Generative AI (GenAI). GenAI tools can further the procurement function’s ability to derive actionable insights and free up time from operational activities to focus on analysis and relationships.
For example, GenAI can be used to assess existing supplier performance and draft improvement plans, draft communications to suppliers to speed up information sharing, or identify alternative suppliers that meet specific requirements.
Supply change
Ultimately, to avoid disruption and bolster resilience, organisations must transform their spend management. Businesses who fail to digitalise their spend management will miss out on the ability to continually assess risk exposure and build a complete view of the supplier ecosystem, falling foul of the next unexpected black swan event.
On the other hand, those who can build a more resilient supply chain will set themselves up to swerve future disruptions, build stronger supplier relationships, and overtake the competition.
