Your Top Three Most Painful Lessons Learned From The Pandemic
We asked, and you answered! The turbulence of the past 18 months is still impacting procurement and global supply chain now – here’s what you told us you’ve learned so far.
The results are in! More than 340 of you took our survey in July to tell us how you’ve been coping since COVID-19 hit. Encouragingly, you said the pandemic taught you some really positive lessons.
Like, the powerful impact of procurement for your organisation. As Hal Good, President of Procurement Pros Group, put it:
“The pandemic has spawned welcome recognition of the importance of procurement and supply chain to achieving, supporting, and protecting the success of organisations large and small and the economy in general.”
On the other hand, you shared some hard-fought lessons that fundamentally changed the way you operate.
Here are the top three biggest (and most painful) lessons learned. And what you’ll do differently going forward.
Painful lesson #1 – We were blinded by a lack of supplier and geographic risk visibility
Before the pandemic, procurement teams were pressured by the powers that be to slash costs. Hence, the thrifty but risky strategy of ‘just in time.’
But the laundry list of 2020’s natural disasters, cyber security breaches, and geopolitical risks were eye-opening. “Once upon a time, there was redundancy in [the] supply chain,” said risk expert Justin Crump. “There was depth in [the] supply chain. That’s expensive so it’s been engineered out. The problem with efficient stuff is [that] it’s very prone to disruption.”
Something our profession knows too well. 46% of you said you didn’t have the supplier and geographic risk visibility you needed to weather the torrential storms that raged.
What you’re doing differently now:
Since the widespread disruption, many of your roles have shifted to prioritise risk mitigation over pure cost savings.
Part of that strategy is bringing production closer to home. 40% of you plan to shrink your global supply chain – relying more heavily on local suppliers. You’re hoping to avoid many of the logistics and transportation disruptions that caused havoc this past year.
The Suez Canal incident earlier this year only heightened your need to consider different delivery options, with one respondent observing: “Chartering of air freight may be the only way to ensure high priority items arrive in time over the next 6-12 months, in particular the high season. Companies will need to review the way they have traditionally managed international freight and find creative ways to find alternate options.”
However, onshoring and nearshoring isn’t just about risk avoidance. You cited other reasons like supporting local communities, securing local jobs, and improving overall sustainability.
Painful lesson #2 – We didn’t have the tools and agility to respond fast enough
How many of us were relying on Excel spreadsheets when the pandemic hit? Too many. There’s nothing inherently wrong with them, but they don’t have the advanced capabilities to help you detect disruptions early and take action.
Like this recent Procurious article put it: “[B]eing an Excel ninja won’t be enough in the brave new world of digital procurement.”
What you’re doing differently now:
You said increasing your use of technology is the key to agility – particularly predictive analytics, artificial intelligence, and machine learning.
One respondent put it bluntly: “Digitalisation will make or break post-COVID-19 procurement organisations.”
And it’s happening faster than anyone could have predicted.
Since the pandemic started, digitisation of customer and supply-chain interactions, and internal operations, sped up by three to four years, according to McKinsey research. That’s right. We’ve been blasted several years into the future – all in a matter of months.
While some of you are concerned about being displaced by technology, most see it as an opportunity. One respondent said, “Technology like advanced analytics will help procurement become a major driver in the organisation. The CPO will be recognised as just as important as the CFO to business success.”
Painful Lesson #3 – Our network of trusted suppliers was too small
China made a name for itself by becoming the place for reliable, low-cost manufacturing. Entire companies were built on the backs of cheap labor and cheap pricing. But the huge disruptions across Asia sent procurement teams scrambling to find a plan ‘b.’
We all felt the uncomfortable effects of supply chain fragility, which led to a renewed interest in onshoring and nearshoring. But now that operations are returning to normal, where will you do business?
What you’re doing differently now:
43% of you plan to expand your supply base to avoid too much concentration in one geographic area. While China isn’t going anywhere, western companies are increasingly setting sights on manufacturers in Central America and Mexico.
Take denim for example. The import of denim jeans from Mexico to the US was up 54% in the first half of 2021, according to the United States Fashion Industry Association.
And this new approach is paying off. You report that expanding and diversifying your network has led to increased agility and faster recovery.
As one respondent said, “We will all become more reliant on local suppliers, and procurement will be more relied on than ever to develop alternative supply chains.”
Several of you noted the pandemic has also changed the way you work with suppliers, with a stronger emphasis on relationships. One said: “The way forward is working on better supplier/ buyer understanding and relationships with a focus on true partnership.”
Enjoyed your sneak peak of the survey results? Want to see even more?
Join us for the global “What Next? The Great Procurement Reset” webcast on 15 September at 1:30PM GMT. Hear Procurious Founder Tania Seary and an all-star panel of industry experts reveal how you can thrive in your career and team during this great procurement reset.
Sign up now for the webcast and be one of the first to get your free copy of the “What Next” report, sponsored by Compleat.
