5 Procurement Lessons Learned from The COVID-19 Pandemic

The turbulence of the past two years since the start of the COVID-19 pandemic is still impacting the global supply chain in multiple ways. Before the pandemic, supply chain departments across the globe experienced top-down directives to implement risky strategies to save costs. Safeguards were labeled expensive, while bespoke third-party supply chain partners were underpriced and under-utilized. Some of these policies diminished supplier relationships, reduced risk visibility, and rendered the supply chain prone to disruption. Hence, supply chain executives have detailed key supply chain lessons from their experiences during the COVID-19 pandemic. Here are the top five (5) most impactful lessons:

Improve Supplier and Geographic Risk Visibility Through Multi-Sourcing

Experiences from the COVID-19 pandemic have highlighted the importance of procurement risk management. Single-sourcing supplies for critical industries is never a good option. COVID-19 limited procurement sources, making the ability to select alternative suppliers even more vital to success. Our industry stakeholders at Northfield, from automotive to healthcare, affirmed that the COVID-19 pandemic caused multiple problems, such as production delays that significantly narrowed their margins. They’ve realized the value in managing risk through increased geographic awareness to prevent catastrophic impact on their business.

Invest in Technology that Enables Agility and Resiliency

Supply chain resiliency is the ability to react to disruptions and mitigate their unwanted effects across the supply chain. Resilient teams establish contingency plans that cover procurement, production, and logistics. Most medium and large companies believe in the effectiveness of supply chain resiliency, but only a minority establish a culture that embraces it. Some suppliers have set demand plans that promote resilient strategies that focus on proactive rather than reactive demand forecasting. Some approaches focus on multi-sourcing and geographic supplier diversification, as earlier discussed. The most impactful strategies incorporate technology that strengthens customer delivery timelines, such as predictive data analytics, artificial intelligence (AI) and machine learning (ML), supply chain optimization, and visualization. We believe that technology will become the backbone of procurement operations and drive business growth.

Need for Inventory and Geographic Diversity

Because of global dependence on Asian and European suppliers, the onset of the pandemic caused a panic that shook even the secure supply chain channels. As a result of the fallout, supply chain strategies have shifted to understand the capabilities in alternative countries such as Central and South America, the Middle East, and Africa. Less popular Asian manufacturing hubs such as Malaysia, Vietnam, and Sri Lanka are now considered viable alternatives for future sourcing. Meanwhile, supply partners in China, the US, and Europe are building essential procurement and production management relationships to prevent unnecessary disruptions to the supply chain.

Importance of Strong Vendor Relationships

Supply chain success relies heavily on people, processes, and technology. As we know, businesses thrive based on relationships built over time. The supply chain crisis arising from the pandemic highlighted the importance of strong relationships across the supply chain, from procurement to manufacturing and logistics. As the scramble for PPEs impacted companies globally, procurement managers had to lean on prior relationships to get closer to suppliers. Without previous interactions, communication quickly became strained as suppliers scrambled to share information on supply availability, lead times, pricing, and service, sometimes onboarding vendors from scratch. Those with prior relationships were able to scale hurdles saving weeks of delay.

Partner with Manufacturers and Upstream Distributors

We cannot overstress the importance of procurement partners in manufacturing and production management. A manufacturing partner has access to resources they can extend to companies because of existing relationships. A third-party procurement partner can help companies navigate supply chain disruptions and provide risk management and supply flexibility. Some large companies would prefer to bring manufacturing operations in-house to increase influence on decision-making. However, companies with fewer capital resources can leverage a partner to bridge communication gaps through optimized production capacity and dedicated production lines. While our experiences with the COVID-19 pandemic and the disruptions it wrought on the supply chain are unprecedented, the lessons have provided an opportunity for tremendous growth. The pandemic sensitized stakeholders on the importance of robust procurement and supply chain processes in ensuring long-term business stability.

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