Supply Chain Management

Supply Chain Disruption, Inflation, and a Chance for Procurement to Change

It was the worst of times, and then it got even worse. That’s the reality of the supply-chain disruptions during the past few years—rapidly evolving from a reliable supply and stable pricing to soaring inflation and never-ending disruptions of virtually every type.

Somehow, our behavior surrounding disruption tends to be consistent. There’s a significant challenge, we run to fix it, and when the challenge is over, we revert to our pre-challenge days—without taking a serious look at what we should have learned and implemented. So, one of the questions we take away from all of this is, “What will be saved from the solutions we’re putting in place when this ocean of disruption finally ebbs?”

Hopefully, the revamping of how procurement has been with the pandemic, pricing, lead times, and shortages will be one thing we take. Those that came out and aggressively saw what wasn’t working and created a roadmap for improvement—did much better than their counterparts who sat and watched. Those that created a new procurement operating model and designated small and agile teams focused on advanced analytics and systems improvements enabled a cross-functional approach to cost and margins—one that likely is difficult to give up. So, these companies are not likely to revert to pre-disruptive days.

The supply chain will always exist in an unpredictable world. It’s now mandatory to have end-to-end visibility, strong supplier management and logistics, and solid planning and execution. There must be new levels of supply chain agility to understand and do anything about what may come out of nowhere, have a severe impact, and try to mitigate the risks to cost and service—and this capability is found in supply chain planning and execution. When disruption hits, it’s folly to run and create a new plan on the fly. That plan must be able to be implemented quickly as well.

This involves delivering digital inputs and creating domain-specific applications that leverage the power of planning.

So, what can procurement do in this crazy continuation of disruption? You can’t go anywhere unless you know where you are now. What happened over the past three years, and what was your company’s response? Was that response effective? What was the result? What did supply chai disruptions do to the commodity and supplier levels? Are we aware of our suppliers’ industries? Do we share insights internally and, when appropriate, externally to protect revenues and margins?

Disruptions will continue. Do we know like the back of our proverbial hand what inflation and volatility do at the commodity and supplier level? Where are we regarding pricing, technology, inventory, design, and processes? How are we at recovering and controlling costs during inflationary times? Most importantly, what are we doing as we learn and improve? Are we implementing permanent safeguards? Are we implementing technology that enables visibility and improvements long into the future? How will our new normal be the base as we advance and supply chains continue to evolve?

Procurement, it’s time to get busy institutionalizing a new procurement operating model and then don’t stop. Continue to implement, create, understand and grow. Never has procurement’s role been more important—and any tendency to go back to old ways once any disruptive threat is over must be relegated to being a thing of the past. Ongoing evaluation is a must.