Procurement in the time of radical changes.

In 2020-2021, we have experienced a perfect storm hitting our supply chains: pandemics, home offices and remote teams, border closures, downsizings, labour shortages, masks deficits, price increases and logistical delays. All these factors are putting enormous pressure on businesses and consumers. After all this, what other "black swans" could we’ve expected? We are now faced with an unprecedented disruption of global supply chains. The situation is changing rapidly, and each time these changes have dramatic implications for the supply chain and procurement.

What are the right procurement tools and approaches to use in this situation? How can we make sure that we and our organisations are as prepared as possible in the current environment of economic and political turbulence?

The first thing you had to do to get high-risk materials was to buy whatever suppliers had ‘on hand’. The bad news is that if you have not yet done so, you may already be too late. In the meantime, buyers should urgently consider switching to suppliers from other non-risky countries.

In any case, you should be prepared for a significant increase in price of purchased goods and delivery. This situation will have consequences not only in terms of transport costs, but will also lead to delivery delays and probably longer logistic routs. Certainly, in the short term, you should expect shortages and reduction in ?product quality when switching to analogies.

Even with local suppliers, there is no room for complacency. Material, component or equipment from your suppliers or your suppliers' suppliers could fall under supply constraints and subsequently hit your business.?Byers now urgently need to gather and have transparent information not only about first-level problems, but also what is happening in the supply chain as a whole, manage risks and create end-to-end crisis plans with everyone in the chain.

Clearly, all of these challenges related to the resilience of complex supply chains will not be resolved quickly, and the most prominent of these is seen as reducing imports.

The pandemic has already led many organisations to consider reducing their reliance on international suppliers and instead to consider producing themselves or buying from local producers, limiting imports from other countries. Given what's happening now, the pace of import substitution should only increase, which means more work and more importance for procurement departments.

How to develop new suppliers.

If you're not already using local suppliers, it means that either they do not exist or they are producing products that do not meet your quality standards. And that means you need to get involved in supplier development, working with them to create new manufacturing capabilities or competencies.

Finding domestic suppliers for joint long-term projects to develop and introduce new production is a complex and painstaking work that requires specific skills and knowledge. This work should be carried out on an ongoing basis. Dedicated resources must be allocated to this work in the purchasing department. These are employees with in-depth technical knowledge of the specific category to be procured, able to find, organise and lead teams of specialists from several companies and negotiate with them.

Potential suppliers are sought at specialised trade fairs, working with sectoral unions and ministries. Suppliers who already have similar but lower quality production and who are able and motivated to expand their product range, improving their products and making them more highly profitable, are best suited.

New supplier development specialists, together with the quality department, suppliers and other specialists involved, make up the project team. This is not an office job. They take part in supplier production audits.?Together, they identify the equipment and process improvements the supplier needs. They share knowledge and know-how, production documentation, specifications, samples of current products, participate in implementing standards and procedures, train supplier staff, and invite various experts to provide advice.

The project team jointly participates in test productions at the supplier and fine-tunes the prototype production batches to the specifications of the required quality. It is very important, that in case of the slightest deviation in the quality of delivered materials, contractual and partnership relations are not broken, but on the contrary, corrective actions are jointly developed to eliminate deficiencies according to the 8D method (materials on this methodology available on the Internet). Control maps, variance maps and agreements on plans for improvement will be very useful in this process.

Sometimes, it may be necessary to change the process and update the quality standards not only at the supplier but also at the procuring company in order to achieve result. There are also examples where the procuring company and the supplier agree on joint investments in the supplier's fixed assets and equipment.

By developing suppliers, organisations can not only move away from imports, but also create a competitive advantage in the form of a new product to sell, a new streamlined process or the introduction of a new standard.

Either way, you have to be prepared that supplier development is not a quick process. Depending on the complexity of the project, it can take years. Therefore, when choosing a supplier for joint development, we must remember that we are choosing a business partner with whom we will work for many years and whom we trust.

In my experience, not all suppliers are willing to commit resources to such complex, long-term projects for an individual client. They already have an established business and market. Working on new products will require a lot of resources, and they do not trust the procuring company. And this lack of trust can undermine the success of supplier development programmes. To overcome this problem, you need to use leverage to build trust and develop suppliers, such as open communication at all levels, joint long-term planning, long-term contracts and dedicating your own resources to participating in supplier’s new product development activities. Make suppliers feel part of your business. Tell them about your processes and listen to their concerns. Involve professional associations and ministries in the process and get them on your side. They may be able to help you persuade your supplier. If you don't have enough influence, it may make sense to collaborate with other companies who also need to make these products locally.

However, despite all the difficulties described, developing suppliers is essential. It's worth the effort, because now more than ever, suppliers can make a huge impact on a company's processes. They play a ?central role in sustaining business and increasing revenues, as it is now more and more important to ensure a consistent supply of quality and competitive resources from trusted and reliable suppliers.