For more than two years, the Covid-19 pandemic has disrupted the supply chain. The pandemic put many supply chain global leaders in a fix, testing their resilience and flexibility. It substantiated the need for effective sourcing solutions across the world—the need to provide medical supplies and other important stuff to customers on time. Several companies’ resiliency was challenged during this challenging time, pushing them to maximize their sourcing leverage during the pandemic.
As economies rebound, efficient and secure supply and distribution of goods and services are prioritized. To mitigate supply chain risks resulting from shifting consumer behaviour and changes in routes, sourcing companies need to implement agile frameworks.
Global supply chain problems
The supply disruption that started in China, the major global supplier, and the demand shock pursued as the worldwide economy shut down exposed vulnerabilities in firms’ production strategies and supply chains everywhere. Momentary trade restrictions and shortages of critical medical products and other products highlighted their vulnerabilities. Those predicaments, combined with the U.S.-China trade war, have sparked a rise in economic patriotism. Consequently, manufacturers worldwide will be under immense political and competitive pressures to increase their internal production. Expand employment opportunities in their home countries reduce or even eliminate their dependence on sources that are believed to be risky.
The global market is highly interconnected, making it impossible for businesses to work as islands. Today’s lack of uncertainty in the worldwide market has resulted in supply chains struggling to achieve global resiliency. In order to combat uncertainty, supply chains need to assess the gaps in their sourcing capabilities. It is crucial for industries to have strategic relationships with a few suppliers, relying only on one supplier.
Your business is left exposed when it depends on a single supplier for a high priority unit or material. If that supplier produces the item in only one plant or one country, your supply chain risks increase substantially. The China-US war has led to other countries diversifying their supply base, moving from one supplier to a few more suppliers to mitigate supply risks. However, removing China from your strategic vendor list is not a wise decision. As China has established transport networks, significant economies of scale and a highly efficient workforce, it makes a formidable competitor.
How to maximize your supply chain leverage?
Adopting new technologies lowers costs for the company as automation decreases, and workers realize that robots can work safely with humans. As a result, more types of jobs are becoming automated. The spread of the pandemic has made automation more appealing, as factories are now socially dispersed. Nowadays a requirement. Because of these changes, it’s becoming more feasible for off-shore production to be transferred to more expensive countries.
In many companies’ Procurement primarily focuses on cost reduction. Reducing costs should be one of the primary goals when implementing a cost reduction plan. In today’s world of competition, however, where most firms don’t only focus on cost reduction as a method of achieving their goals, it is more likely to place more attention paid to creating value and not overlooking cost and waste reduction.
Discover conclusive strategies to maximize your supply chain strategy with the Procurement Series. Ian Thompson, the leading expert in Procurement, will advise you to establish mutually beneficial strategic vendor relationships. Grow your supply chain despite the risks imposed by the pandemic. Register for the corporate training at www.kexxel.com