Business as usual - Sourcing in times of uncertainty

Procurement professionals, especially those responsible for the Sourcing of goods and services, are used to dealing with large swings in demand and supply. But the effects of Covid-19 are proving extremely difficult for even the most adept sourcing practitioners.

The recent situation has intensified levels of uncertainty faced by sourcing professionals, including price volatility, mounting supplier failures, recurring capacity and material shortages or oversupply.

There are, however, some best practices and tools that can help deal with not just uncertainty in demand and supply, but supplier failures, price volatility, and supply chain risk.

Improve the effectiveness and transparency of both strategic and tactical sourcing
Obtaining best value for an organisation will be critical, not only to success, but in some cases to survival. One way to achieve this is by improving the effectiveness and transparency of both strategic and tactical sourcing processes, all while reducing administrative time and effort. There are strategic tools available that provide flexible, collaborative, and efficient methods for performing effective sourcing events of all types.

Get what you need
Accurately and effectively managing sourcing events should be a priority in “normal” situations, but being able to easily and quickly define and manage each sourcing event is now crucial. There are tools that enable you to specify dates and questions and score responses automatically. You can also get multiple quotes for one-off purchases, through one system, and create a level playing field for competitive bidding. 

Manage your supplier base
Building a strong supplier base may not be the main priority at the moment, but maintaining your base should be. This can be achieved by structuring and streamlining the entire supplier lifecycle – from initial identification to adoption, approval, transaction and analysis.

Proactively monitor and manage supplier risk
It’s more important than ever to proactively monitor which suppliers are at risk, and have contingency plans and/or alternate suppliers in place. There are SRM tools available to provide early warning of suppliers who might be in trouble. It is also useful to monitor potential trouble indicators yourself - e.g., a supplier desperate for shorter payment terms or delivery or quality performance issues. Contingency plans are essential, especially when there are few or no alternate suppliers.

Collaborate with Suppliers on new cost reduction innovations
Work together with suppliers on how to reduce costs and understand cost structures. Look at options with suppliers, such as different ways of payment and different ways of managing inventory. Don't just keep doing the same thing, just because that's the way you've always done it. These times call for innovative approaches.

Expand success measures, beyond cost-reduction
Cost savings are still a key metric for procurement, however, there are additional areas, including quality, availability, sustainability, even safety. For these times, you must pick the right metrics for your organisation.

Help key suppliers with "financing" for your orders
Procurement professionals need to get much more hands-on about helping to alleviate some of the cash flow issues of critical suppliers. For example, you may agree to shorter payment terms in exchange for discounts, to help suppliers' cash flow.

Prepare for the recovery
It may not currently seem like it, and will take time, but as we emerge from the current situation, we will eventually get back to normal, most probably with shortages once again. This potentially means that suppliers will select who gets limited supply. It is good practice to remember that, and to build good relationships when things are slow. We know that differentiation of the companies' products and services in the marketplace is a desired goal, but now companies should also try to differentiate themselves on the supply side - become a "preferred customer." Make your company easy to do business with.

Proactis can help you keep on top of these considerations, and even raise standards.