Consequences of the COVID-19 pandemic are expected to ripple through global supply chains for months to come. For procurement professionals, three growing trends are reshaping the industry as we’ve traditionally known it.
Interest in Resilience
The pandemic has highlighted just how fragile global supply chains have become. The ongoing process of driving costs down in order to increase profits led to entire industries becoming heavily centralized over the last few decades — especially manufacturing. When COVID-19 hit, this caused bottlenecks to rapidly emerge in the transfer of goods.
As if the pandemic — with its visions of freighters sitting idle off the California shore — wasn’t enough of an omen, enterprises were then hit with two further warnings about the dangers of fragile supply networks. One came in the form of Ever Given, the Evergreen container ship that managed to get stuck in the Suez Canal, leading to tens of billions of dollars in negative economic impact. The other was the Colonial Pipeline incident, which saw major disruptions of energy supply in the eastern U.S. following a ransomware attack.
Companies are learning that while procurement strategy can’t predict pandemics, rescue freighters or prevent cybercrime, it can significantly mitigate the fallout of such disruptions. When enterprises build a resilient supply network, it opens the door to “anti-fragility,” or the ability to actually benefit from disruption rather than suffer from it.
At the heart of anti-fragility is optionality, and indeed, many companies that thrived during the pandemic were those with diverse supply both upstream and downstream. Companies without options — no way to obtain components or products; no way to facilitate operations while under lockdown or government restrictions; no way to distribute their goods or services — were the ones that experienced the worst effects from the pandemic.
Needless to say, entrepreneurs, executives and other leaders in business have taken note of all this. Where resilience may have been of interest in previous years, it’s now a priority topic in boardrooms and strategy meetings around the world.
Better Use of Data
The availability of more, better and faster data has been a driving force in many industries — from healthcare to hospitality — for a number of years. This hasn’t gone unnoticed in procurement; in fact, the argument could be made that this field is all about data, as successful supply chains are built on a network of measurable, reliable information about what, when, where and whom.
The pandemic has done two things. First, it has elevated the importance of data in general from a potential source of advantage to an absolute necessity. Second, it’s provided more context about what kinds of data are needed or are underutilized and how they may help organizations in ways that were previously overlooked.
There are clear benefits in allowing supply logistics to become more data-driven. More value can be extracted from upstream suppliers through preemptive market assessment and risk analysis, real-time data about consumer choices can inform rapid decision-making, and when data is rigorously collected, analytics can provide round-the-clock monitoring of costs and availability.
Of course, it’s important to remember that data is worthless without the interplay of human interaction to interpret, contextualize and apply it. All the technology and data in the world could not and did not help businesses fight through the complications brought on by COVID-19 alone. Rather, it was human ingenuity that provided the innovative solutions that, when paired with good use and understanding of data, enabled companies to find success through the pandemic.
What will differentiate the most successful supply chains of the near future is not simply an appreciation for data, nor the ability to collect and analyze massive amounts of it. Instead, it will be their adoption and integration of superior tools and intelligence software, along with the right amount of human touch, that will allow the data to translate into strategic procurement decisions.
Focus on Labor
Labor has always been a critical part of procurement, but COVID-19 pushed it to the forefront. The pandemic led to a great urban exodus, reshuffling labor forces in many regions around the world. Factoring into that was the explosion of remote work and the worldwide paradigm shift regarding job flexibility.
Extraordinary financial stimulus and signs of inflation are being reflected in recruitment and hiring, with premiums on experience and skill rising ever higher. And with its outsized impact on women and minorities, the pandemic has added urgency to strategies for workplace diversity and inclusion.
All of this means that procurement departments and professionals are learning to think differently. The way people want to work — and how, where and why — is fundamentally shifting. The effect on supply chains is an indirect one, but it is still crucially important, and organizations that manage it well will see the difference reflected in business outcomes.
Procurement is a complex business by nature. The ability to strategically pivot between not only vendors and distributors but between strategies and priorities is a defining feature of great supply systems. As COVID-19 moves behind us, we'll see a rebalancing of global trade and supply economics, but the long-term effects on supply chain decision-making will persist.
Stephen Day is chief procurement officer at Kantar.