Businesses have experienced significant turbulence since the start of the year, and this has shown no sign of slowing down as February draws to a close. Businesses should expect the unexpected and flexibility will be critical as 2023 continues to play out.
As globally significant events such as the pandemic, the war in Ukraine, and accelerated climate change impact global organizations, supply chains have been absorbing many of the shocks, and longer-term challenges are gathering on the horizon. How can businesses continue to build resilience this year, and get ahead of volatility through their procurement teams?
Acceptance is the first step
A volatile environment for businesses is here to stay and it remains to be seen how long this will last. From the drawn-out conflict in Ukraine, to surging Covid-19 cases in China, to extreme climate events, businesses must start to work within the ‘new normal’ and get used to operating in a world that is filled with uncertainty.
There are broader trends that leaders must also consider in the longer term. As the appetite for globalization declines in the context of rising trade tensions (most notably between the US and China), procurement teams need to prep businesses with a more localized supply chain. This will be a significant change for some firms, with success depending on multiple factors such as consumer loyalty, availability of raw materials, and hard-to-predict prices.
Most don’t have the luxury of waiting for a new strategy, so how do you build resilience in the short term?
As volatility continues to play out, procurement teams’ ability to strengthen relationships with suppliers to get in-depth analysis will be key to building up a bank of knowledge and insight. Better engaging with suppliers will help businesses predict the challenges on the horizon for both supply and demand and can be your greatest knowledge-source due to their proximity to the key drivers of snarled supply chains.
Resilience can also be built through a thorough internal analysis of your own business and the rate at which you are selling your own products and services. For businesses to be resilient in 2023, they must identify gaps in their value chain and act quickly to alter course before it becomes their undoing.
Remember to always have a contingency plan:
If your business model is dependent on a singular procurement strategy, you will be faced with greater risk in the year ahead. Building contingency will help you maintain agility and always have a new plan to revert to should ‘Plan A’ prove damaging to your business outlook.
Despite these challenges, there is much to be optimistic about. The crises of recent years have accelerated businesses’ shift to technology-driven solutions in an effort to make them more resilient to change, bolstering supply chains and improving their transparency. Procurement teams and those that lead them will prove vital to building resilience.
Read our CPO Report to learn more about the key focus areas for procurement in the coming year.