By Christopher Bousigues, Chief Revenue Officer, Synertrade
Risks exist in every business and managing these potential disruptions in a timely and effective manner is at the heart of any successful organisation. Recent years have highlighted the importance of proactivity in identifying and addressing risks in the supply chain, as the pandemic and geopolitical tensions have forced many companies to modify their supply chains, often creating global ramifications for the transportation of goods.
As demand for some products rises post-pandemic, cultivating resilient, scalable and sustainable supply chains is paramount. Amidst all this, data is increasingly uncovering additional opportunities for organisations to make better-informed decisions, which can strengthen supply chains to, ultimately, transform business value and output. However, despite the need for critical development, a recent report from The Hackett Group indicates that just half (48%) of companies have a 2024 improvement initiative on their transformation agendas.
Prioritising risk management
In an uncertain global operating environment, businesses must prioritise risk management in their procurement functions to stay ahead and mitigate risks swiftly. From ESG to changing legal requirements, it’s easy for organisations to encounter issues in their procurement environments, reinforcing how risk management can act as a line of defence against reputational challenges.
Additionally, risk management should include contingency planning to best prepare teams for supplier failures or emergencies. These can take place at short notice and have a significant impact. In today’s world, risk is unavoidable for every organisation, however, by prioritising risk management in the procurement functions, they can be better informed and ready to take proactive measures, when necessary, to remain firmly in control of their operations and supply chain environments.
The challenges facing CPOs
Ultimately, Chief Procurement Officers (CPOs) can be over-reliant on manual and outdated processes which are time-consuming and ineffective. Through leveraging procurement software, businesses can strengthen supply chain resilience to not only mitigate risk but also better control spending.
The role of the CPO has changed dramatically. Previously, the key focus was on delivering the best possible outcomes for negotiations with suppliers, whereas now the role also requires a wider and more strategic overview of how procurement can contribute to overarching business goals.
Additionally, the volume and velocity of the data accessible to a CPO has never been greater. Managing this is hugely challenging – particularly finding the insight that is going to contribute to a successful business strategy for the company – but it also enables CPOs to have a positive impact very quickly.
One example is in planning. If teams can more effectively predict different business risks, they can mitigate them and ensure the business can invest in opportunities where reputational and regulatory risks are lowest.
The ability to deploy AI to help this process is the single biggest opportunity open to CPOs today. In fact, CPOs expect data, analytics and gen AI to play a core role in every business decision by 2030. However, respondents in a McKinsey survey say that data infrastructure is not ready. In analysing and predicting outcomes for the future, these insights allow the role of the CPO to be business-critical, with the next generation of CEOs able to come from the procurement side of the business.
Proactive supply chains
Today, businesses must adopt a strategic approach to anticipate and address potential disruptions before they turn into crises. By leveraging proactive risk management, businesses can take early, decisive actions to mitigate impacts caused by these obstructions. This approach minimises immediate impact and prevents smaller risks from snowballing into larger issues that could significantly disrupt operations.
The essence of a proactive supply chain lies in its ability to forecast and prepare for challenges, helping to maintain continuity and reliability in the flow of resources. This foresight enhances operational efficiency and boosts customer satisfaction by ensuring timely deliveries and consistent high-quality service.
Preparing for the unexpected
Contingency planning, where businesses prepare alternative courses of action in case of supplier failures or emergencies, is not a luxury; it’s a necessity for organisations managing multiple products, in various locations serving numerous customers. This planning includes implementing buffer stocks, securing backup suppliers, or having alternative logistics routes, to eliminate potential downtime.
This buffer should be built into ongoing operations to ensure that while the required quantities of products are delivered, there should also be alternative suppliers to draw from during unexpected demand spikes or supply chain interruptions. By leveraging secondary or regionalised suppliers, businesses can continue to operate smoothly even when primary supply channels are unavailable.
Capitalising on opportunities
Incorporating advanced technologies significantly enhances the effectiveness of risk management efforts, enabling organisations to increase supply chain resilience. New solutions provide real-time data insights and predictive analytics, gathering data from third-party providers into one single source of truth. This enables businesses to make better-informed decisions and mitigate risks ahead of time, minimising any potential disruptions.
Meanwhile, maintaining a detailed database of suppliers offers businesses a wide range of secondary supplier choices. These suppliers can be easily compared and evaluated against others to determine which ones meet the specific individual needs of the business. This capability enhances contingency planning by ensuring businesses can continue to operate with minimal disruption even when emergencies arise.
