Why Procurement and Supply Chain are Smarter Together
In response to the pandemic-driven global disruption over the past year, supply chain agendas are now moving more from efficiency and cost to resiliency and business continuity.
In the post-COVID world, it’s critical that C-suite leaders collaboratively address the supply chain and its impacts on the business. As supply chain disruptions become the norm, Supply Chain Planning and Source-to-Pay (S2P) cycles need to be increasingly dynamic and intertwined. One starting point is to reduce organizational barriers and technological limitations and foster greater alignment between the (Chief Procurement Officer) CPO and the (Chief Supply Chain Officer) CSCO.
There are several areas in which this alignment can drive greater value:
Looking beyond China
Organizations in many industries have made greater efforts to diversify their supply chains beyond China. The CPO and CSCO can work together in these situations to assess tradeoffs between the added resilience and the cost impact of the supply chain.
Phasing out old products/introducing new ones
Digital disruption and startups are leading to strong growth in new product development. Putting supply chain and sourcing on the same page can reduce potential delays, lost revenues, and high costs, and improve scenario planning. In phasing out products, collaborative alignment can also help reduce waste.
Increasing focus on sustainability and diversity
Shareholder activism is pressuring companies to demonstrate stewardship in things like ESG (Environmental, Social, and Government) and DEI (Diversity, Equity, and Inclusion). Having supply chain and procurement teams work hand-in-hand, especially using advanced supply chain analytics, can ensure transparency and reduce the risk of being caught off guard.
Ensuring supplier liquidity
While supply chain teams often look at sources through the lens of cost and service levels, procurement can help ensure supplier liquidity by adequately vetting them and supporting early payments or access to financing, if necessary.
Keeping pace with regulatory changes
Supply chain leaders can tap into their sourcing counterparts to ensure they’re aware of coming regulatory changes that could impact sourcing.
Reducing financial, judicial, and cyber risks
Procurement can adequately vet suppliers, continuously monitor the supplier base for judicial and financial risks, and provide leading indicators of supplier risks to the supply chain team.
Adjusting to logistics needs
As the growth in reverse logistics pushes supply chain leaders to look to external providers, supply chain teams can ensure capacity and that projections are made by working closely with sourcing teams.
These are just some of the reasons why procurement and supply chain are smarter together. As external factors continually have a greater impact on organizations and their supply chains, tighter alignment between these two C-suite roles can reduce risk and create a more sustainable competitive advantage.