The post-COVID business world looks radically different from the pre-pandemic economy. Most of the world’s enterprises–regardless of size–suffered from major dips in demand. In fact, in the U.S. accommodation and food services industry, 83.5% of businesses felt a negative impact from the pandemic.
Establishments shut down. Regulations ramped up. Unemployment skyrocketed. Trade with China screeched to a near halt. Global supply chains were fractured. And consumers were locked at home. In just a few weeks, the global economy was turned on its head.
With its widespread impact, coronavirus taught business leaders some tough lessons. In particular, companies have been forced to reinvent their supply chain and procurement techniques.
What is interesting about COVID-era procurement and supply chain trends is that most of them are not new. In fact, procurement specialists have urged companies to enact some of these changes for decades now!
That’s right. Forward-thinking procurement experts saw the writing on the wall years ago. The problem is companies have been slow to adapt. That is, until a global pandemic and global supply chain disruptions gave them no choice.
As companies fight to survive the COVID-19 recession, they’ve finally jumped on these business project procurement changes:
- Diversifying sources
- Risk mitigation
- Going digital
- Safety over cost-savings
In this article, we’ll cover these 5 supply chain management trends.
1. Diversifying Resources
Prior to the pandemic, many businesses were single-source for most materials. This means that they used only one source for any given material or product. In some cases, businesses would use a single source for multiple inputs. Due to COVID-19, this is changing fast.
Forward-looking procurement advisors like RTG Solutions Group have long warned about the risks of single-sourcing. Even without a global pandemic and an escalating trade war between the U.S. and China, single-sourcing is a dicey practice.
The pandemic showed just how dangerous it is to use a single source. Without a backup source, a political, economic, or social event across the globe can dry up your resources overnight. Then, your options are to find a new source as fast as possible or completely halt operations. Needless to say, both options are terrible for business. And many companies found themselves in this predicament as COVID-19 unfolded.
Now, organizations see the benefits of diversifying their sources. This means not only having multiple sources for the same resource, but also spacing them out geographically. Diversifying and dispersing your sources ensures that you have back-up plans in case one of your sources faces an internal or regional problem.
2. Risk Mitigation
Risk mitigation has been around forever. Technically, every item on this list is a form of risk reduction. However, risk mitigation as a formal operation has become popular due to the pandemic. More and more, organizations are implementing comprehensive risk mitigating policies in procurement.
Why? COVID-19 showed companies that short-term cost savings (for example, using a single source because it’s cheaper) could leave them with a hefty bill in times of crisis.
Like other items on this list, risk management is a strategy that supply chain pros have encouraged for years. Companies have been slow to adopt it because it is not an instant gratification investment.
It’s a little like getting your flu shot. You probably won’t feel a change in your body the next day. But come flu season, when everybody is sick except for you, you’ll be thankful you invested in preventive medicine.
Risk mitigation does the same for businesses. You won’t feel a change the next day. But, over time, problems will become less and less common. And when a major catastrophe sweeps the entire globe, your business will fare better than companies without risk mitigation plans.
So what does risk mitigation look like in procurement? Well, that varies from company to company. A good place to start is to assemble a risk mitigation team led by a risk reduction specialist.
First, your team should do a deep-dive into your supply chain to find vulnerabilities. Brainstorm every possible thing that could go wrong at each junction of the supply chain. From there, come up with a back-up, and a back-up to your back-up plan for every scenario. Finally, implement those changes.
Want to learn about a super underrated risk mitigation strategy? Check out our article, The Importance of Business Process Documentation in Times of Crisis!
3. Going digital
This is yet another pre-existing procurement trend that was accelerated by the pandemic. Like any other industry, the procurement world has a wealth of tech tools at its disposal nowadays.
Enterprise Resource Planning, Internet of Things, RFID tags, Inventory Management Systems. These are just a few time-saving digital tools that are quickly transforming supply chains. They can help you:
- Streamline processes
- Centralize information
- Integrate systems
- Automate tasks
- Improve quality-control
- Forecast risk
- Manage vendors
- Facilitate sales and operations planning
- And more!
It’s no wonder procurement specialists have begged companies to go digital for years! Inventory management tech is valuable all of the time. But, in times of crisis, it’s not just valuable. It’s vital.
During the pandemic, companies were forced to enact social distancing and send employees home. Those without digital networks were badly hurt. Because their supply chains relied on boots-on-the-ground, they had to reinvent themselves overnight.
But organizations that already had cloud-based technology were not hit as hard. They already had the systems needed to maintain operations remotely. They were able to re-draw contracts, adjust procurement, manage inventory, and navigate risks away from the office.
If you want to learn the ins-and-outs of supply chain technology, check out our article How 4 Data-Driven Tools Can Improve Your Inventory Management!
4. Health and safety over cost savings
On a fundamental level, COVID-19 forced business priorities to change. It re-wired the goals of our economy.
Not having experienced a supply shock of this scale in decades, companies became short-sighted in their supply chain operations. Often, they opted to save money in the short-term over investing in their health and safety protocols.
Like other points on this list, supply chain leaders have urged companies to overhaul their safety and hygiene policies for a while. Why? Hygienic practices make for safe and healthy workers. And safer, healthier employees are happier, more productive, and have fewer absences.
However, for many businesses, it was the pandemic that taught them the importance of safety over cost-savings. And it taught them the hard way. Both regulators and consumers examined companies’ health and hygiene practices under a microscope.
Businesses could no longer get away with having subpar health and safety policies. A mix of government regulations and public disapproval made sure of that. And this holds true across industries.
Product packaging, food service, distribution, customer support, warehousing – all industries and operations are now held to a higher health standard.
What does this look like in procurement? Disinfected surfaces, minimal person-to-person contact, enhanced product packaging, temperature readings, sick employees sent home, contact-free deliveries and more.
Unfortunately, for many organizations, these supply chain practices are new. But now that health is a consumer priority, they are probably here to stay.
The COVID-19 pandemic has impacted every sector of the economy. Procurement and supply chain is no exception. As a result, our industry is changing at lightning speed.
Diverse sourcing, risk mitigation, digitization, and safety protocols have risen in popularity in the wake of the pandemic. But most of these strategies are not new. In fact, forward-thinking procurement leaders like RTG Solutions Group have long urged companies to consider these changes.
Businesses that had previously folded these practices into their supply chain were better equipped to navigate the pandemic. But many companies had to overhaul their procurement departments.
Regardless of industry, these four procurement trends are likely to impact your business in 2020 and beyond. Does your business need help navigating supply chain trends and disruptions? Contact us today to speak with our procurement specialists!