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The last few years have seen a series of global crises: Ecological, of course, then health, economic and geopolitical. The period of shock that accompanied them led the procurement function to address the most pressing issues, with the priority being to maintain activity. While most of these crises are still going on, the procurement function must get back to basics to protect current corporate profitability while preserving future growth potential. To do this, it needs to review its strategies for managing the supply chain, with the aim of guaranteeing the long-term durability of its activities.
Supply chain management in times of tension
Supply chain management (SCM) refers to all the resources, methods and tools used to manage the supply chain in the most optimal way possible. The main challenge is to optimise operations, from sourcing raw materials to delivering the final product to the end customer within a reasonable timeframe, including managing inventories and the logistics chain, as well as transporting goods. This involves coordinating and integrating all product flows, information flows and financial flows within each individual organisation as well as between them. To achieve this, supply chain managers can rely on software systems such as ERP (Enterprise Resource Planning).
The current tense environment has highlighted the vulnerability of the global supply chain. For companies, this has brought supply chain management back to the top of their list of priorities. It is through effective supply chain management that they now hope to gain agility and resilience in order to enjoy a significant competitive advantage.
Supply chain management strategy no. 1: Tracking cost overruns
Companies are facing unprecedented pressure with often very reduced visibility on the costs and availability of raw materials. This is why they must preserve cash flow availability and their ability to rapidly mobilise resources in order to be able to anticipate needs.
In this context, which is fraught with vulnerabilities and opportunities, it is the role of procurement departments in particular to safeguard budgets by stepping up vigilance with regard to hidden costs, also known as indirect costs. Maverick spend, overly complex and/or obsolete processes or crisis logistics with urgent deliveries: The pitfalls are many and potentially very dangerous. Procurement departments must thus rally team efforts to strengthen controls and precautions, while optimising existing processes, with a view to controlling the total cost of ownership (TCO).
Supply chain management strategy no. 2: Upholding the principle of fair pricing
Faced with supply tensions, many changes are impacting the usual way procurement departments operate, particularly with regard to supplier partnerships and product selection. Some companies are replacing their usual suppliers for certain procurement categories, others are listing new types of products in response to developments in their company’s business model or adapting their organisation to new ways of working (teleworking, flex office, etc.).
However, no emergency or innovation can justify not challenging a purchase price, payment terms or logistics conditions. Strictly applying best listing practices while upholding the principle of fair pricing is a healthy reflex and, actually, a strategic requirement in times of crisis.
Supply chain management strategy no. 3: Taking stock of force majeure clauses
Supply chain disruptions and volatile market conditions require maximum flexibility from the procurement department. For long-term supply contracts, clauses may exist to provide for conditions enabling quantities to be adjusted according to a specific context. This is why the procurement department’s third reflex in times of tension is to review contracts to identify pockets of opportunities between the initial order and quantities actually delivered.
Of course, this approach should never be to the detriment of relationships with partners. Preserving relationships with the most strategic suppliers is, without a shadow of a doubt, an anti-crisis resource. However, this does not in any way prevent procurement departments from enforcing contractual clauses that were freely negotiated when they favour their company.
Supply chain management strategy no. 4: Strengthening cybersecurity
The rise of remote working, online business growth and reorganisations dictated by urgent situations may have weakened validation and decision-making protocols. This has led to an upsurge in cyberattacks all along the supply chain. In a recent study, consultancy firm PwC warned about this phenomenon: 90% of procurement department managements say they are concerned about cyber threats and 27% of them have already suffered a security breach.
This is why procurement departments must urge all team players to address cybersecurity issues and comply with internal IT security policies. Contractual data and strategic information concerning the supplier ecosystem represent a differentiation factor and innovation driver for the company. All such sensitive data can be coveted by ill-intentioned players.
Supply chain management strategy no. 5: Maintaining digital transformation efforts
Most organisations have embarked on a digital transformation journey, as new technologies are a tremendous performance lever for procurement functions. Even though procurement departments take on many additional responsibilities alongside their traditional duties, it is important they maintain their effort to digitalise processes and update digital tools made available to players.
Digitalising the procurement function continues to make perfect sense, and all the more so when supply chains are under strain. Firstly, it makes it possible to meet today’s challenges, such as saving time when reviewing contract clauses or even securing remote working. But it also provides a way to prepare for the future by integrating innovations into procurement processes.
In conclusion, rigorously implementing these supply chain solutions is vital to guarantee corporate resilience and optimise conditions for recovery at a time when supply chain networks continue to be under great strain. While key historical procurement department challenges such as cost control and contract oversight remain, priority must now also be given to other aspects, with digitisation, cybersecurity and "win-win" supplier relationships topping the list. These strategies will not only help navigate immediate difficulties but also pave the way for long-term growth.
