‘Shifting Supply Markets’
We are inspired by procurement leaders who, during our BCG & INVERTO CPO roundtable series, shared insights on unprecedented supply market shifts and decisions their organizations are facing and how they create value in the new normal.
Achieving Innovation through deeper Supplier Collaboration
Supplier collaboration remains a reoccurring theme. Organizations from all industries agree that their businesses have had to develop stronger, deeper relationships within their supply chains, segment suppliers critical to operations, and improve their supply base knowledge. For example in the grocery sector, the ‘Feed the nation’ campaign highlighted the ability of the grocery supply chain to work collaboratively, react and feed the nation during the pandemic, as well as making significant commitments to suppliers.
Supplier consolidation and looking at diversification of supply bases to maintain a high level of resilience continues to be a challenge. By relying on a variety of vendors across the globe, this is more favorable than relying entirely on a single supply base. Some companies pointed they have had to rapidly switch to finding other markets to buy certain products to meet growing demand e.g, in the food sector, bearing in mind this may impact the taste or recipe of certain products.
As companies navigate the new normal, managing supplier relationships becomes even more critical. Adopting a deeply collaborative approach enables leaders to make quicker decisions, which leads to innovation.
However, in cases where business processes are more dependent and integrated with suppliers, this stands as a challenge as the ability to react and change is limited.
Supply Chain Agility & Decision Making
The impact of COVID has prompted organizations to review their flexibility and how quickly decisions are made. There is now a need for procurement leaders to ensure supplier visibility and become more agile in decision making without hugely impacting profits and mitigating risks.
Given the current climate, business leaders must be quick to decision making and encourage open and clear communication channels to prompt the speed at which information is shared.
Digitalization is a critical enabler in responding to agility and making more informed decisions. The introduction of tools such as advanced analytics, big data, and AI means these can be used to invest in real-time information towards supply chain management.
Maximizing Value through Digital Transformation
The crisis has prompted organizations to accelerate digital transformation projects. It was also a reminder that not all organizations have the data to make supply chain decisions and shone the light on companies that are lagging behind on digital transformation or have not been successful at it. The crisis has caused a monumental shift.
Digital projects that may have been put on hold are now accelerated to the top of the agenda due to the need for supply chain data to make informed decisions.
Preparing for growth through Cost Transformation
According to our research, the number of large companies that employ ZBB has been increasing by 57% year-on-year since 2014. Due to shifting supply markets, CPOs discussed the need to recalibrate their cost base to reflect the new environment. ZBB approaches are being adopted through thorough reviews of payment terms and processes with suppliers to critically assess business effectiveness, leading to termination of services in some cases. Business agreements are also reassessed to determine the functional necessity of individual supplier relationships. Navigating the new normal for some organizations is creating a more efficient cost-based and seeking ways to sustain this in the long run.
Globalisation and New Ways of Working
Technology has proven the ability to work from home seamlessly, forcing businesses to question the notion of ‘the office’ and find ways to embrace newer working models. As we enter the new normal, companies start to review their real estate and property portfolio and its level of usage. In many industries, increase in productivity has led to the re-evaluation of working models and an assessment of what roles remain critical. In some cases, this has accelerated investment in technology for the automation of certain services.
Creating a more Diverse and Social business
CPO’s identified organizations now perform a more active role in engaging unfair and unequal distribution of wealth across the world. To play its part, Procurement will need to think globally by partnering with stakeholders across the globe and structure themselves in different ways to operate effectively. This leads to a ‘Multiplayer eco-system’ of suppliers who are plugged into company systems to provide various services.
Another topic posed to the group was the ability to support smaller and diverse suppliers to weather the storm of the crisis. However, some organisations pointed out the capacity to support smaller suppliers is based on critically assessing how vital the supply base is towards operations.
Building a future with Sustainable Procurement
The topic of sustainability remains on the agenda for organizations. For some, such as pharmaceutical companies, adopting a sustainable supply chain remains vital. Companies are now integrating sustainability into overall business strategy, ensuring this is reflected in the code of conduct and transferred to suppliers. Elevating sustainability to an industry collaboration level contributes to creating a more resilient supply chain.
Our World is Changing Rapidly. Expect the Unexpected. Be Ready to Unlearn Much of what you Know
Looking to the future
Supply chains have been shifting and will continue to move around. While recent events such as Brexit and the pandemic have brought local sourcing to the forefront, specific raw materials would still need to be sourced globally.
As supply markets continue to shift, supply chains will need to become more agile in responding to changes in the market and continue to leverage strong relationships with suppliers and buyers in the medium to long term.
As we step into the new normal, the pandemic has also opened options on what is possible in the short period with Procurement proving its ability to deliver on what the future brings. To sustain this, some priorities are:
- Walk the innovation-talk! – take the next step: Only 45% of more innovative companies walk the talk and truly prioritize innovation and transform
- Strong/engaged leadership builds the foundation for innovation: ‘Success relies on a CEO and a top leadership team that are focused on driving innovation’
- Right leadership at the start of a transformation is key: 50% of CPOs believe “leadership” to be the most critical skill to ensure a growth transformation success
- Prioritize exploration over exploitation: Companies investing in R&D are 29% more likely to succeed in transformation projects
- Transformation is an ongoing capability – harness it: If you had one successful growth transformation, you are 23% more likely to succeed in subsequent ones
- Strong Purpose inspires strong performance: Companies with a higher purpose strength than 65% achieve or exceed their targets
If you would like to participate in future procurement leadership panel debates please contact LanceYounger, ThibaultLecat, Stephen Easton, or Tolani Onabiyi.
INVERTO is one of Europe’s leading specialists in procurement and supply chain management consulting.
Our services range from identifying and assessing the potential for cost reduction and improving procurement performance, to the operational implementation of procurement solutions.
A subsidiary of the Boston Consulting Group, we help companies to become more efficient and stay competitive. Our clients include international groups, leading medium-sized companies from industry and trade as well as many of the world's largest private equity companies.
Our entrepreneurial approach fosters transparency, actionable improvements and measurability. We deliver results.