Procurement: Reinventing the supply chain post-COVID-19

Procurement ; COVID-19
April 10th, 2020
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Most organisations have been put to the test by the health and economic consequences of the COVID-19 pandemic, bringing to light the weaknesses in their supply chains. That is why procurement departments must learn from the current crisis to better absorb any potential aftershocks.

Procurement departments have already identified most of the key areas that will make the next crisis less problematic for businesses post-COVID-19. Procurement departments have identified three priorities to provide the agility that was lacking at the start of the crisis:

Risk management: Procurement departments in search of a new balance for the supply chain

Procurement departments have not delayed in elevating the position of health risks in their risk scale. Consequently, a recent study tells us that 80% of businesses [1] have announced that they want to relocate at least part of their supply chain. The launch of such projects can be explained by two objectives:

  • To be closer to consumers
  • To realign themselves with strategic allies

Although the COVID-19 crisis is not the only trigger, this crisis has accelerated awareness of the risk level of continuously expanding the supply chain. This may have been aggravated by the majority of suppliers being located in a single country away from the production system and consumers.

That is why procurement departments are mobilising to rebalance the supplier portfolio. They are integrating geographical distance and logistical risk into their decision-making process much more.    

Flexibility: A tough challenge in procurement departments to support the supply chain

The key lesson of the COVID-19 crisis is undoubtedly the need for business agility. For procurement, flexibility must be introduced at all levels of the supply chain.

For example, from now on any business continuity plan will include the creation of a maintained operational inventory of equipment for supply chain operators:

  • Personal protective equipment for retained operators.
  • Laptops for operators continuing their work remotely.

For the same reason, procurement departments, working closely with the CIO, will support the supply chain in its digital transformation. The businesses that were able to start working remotely most quickly were certainly the ones which were the most advanced in integrating their information systems. Evidently, the quality of remote access is another significant area that needs to be strengthened.   

Data management: A responsiveness lever for procurement departments to support the supply chain

Of all the stock-outs that businesses encounter, a large number are caused by a shortage of parts, usually under the radar. Procurement departments therefore have huge room for improvement in terms of securing the supply chain, since it is estimated that 70% of businesses [2] do not know their tier [2] suppliers.

In order to manage the millions of data in play, procurement departments must deepen and accelerate the digitalisation of procurement processes.

The specifications for procurement departments are very clear:

  • Identify the strategic players from the beginning to the end of the value chain.
  • Create alternative scenarios based on critical assumptions.
  • Integrate logistical aspects, such as transport routes and the creation of adequate buffer stocks.
  • Provide ways of sharing data internally and with the supplier ecosystem to optimise analyses.

In conclusion, the COVID-19 pandemic has highlighted the need for flexibility in the supply chain, made too brittle by the just-in-time production method that has been pushed to the extreme. The contribution of procurement departments in creating this flexibility is eagerly awaited.

The initial ideas for outlining a more agile approach to the supply chain are centred around a two-fold strategy of supplier relationships and digitalisation of procurement processes.  


[1] Bank of America study — February 2020
[2] Baromètre KYU 2019 des Risques Supply Chain (KYU 2019 Barometer of Supply Chain Risks)

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