Despite being no stranger to disruption and complex challenges, procurement and supply chains have faced unprecedented pressures in the last three to four years. Richard Hogg, General Manager (EMEA region) at Scoutbee describes the industry as “a never-ending deluge of pressures regarding how organisations ensure supply chain continuity and get the right products and services on time, while mitigating risk.”
From Brexit and the Suez Canal blockage, through to COVID-19 and the war in Ukraine, Hogg explains that these disruptions have created challenges for procurement on a scale that has never been experienced before.
Operating in an unstable market has the procurement function centring their focus on developing a balanced strategy with operational execution to ensure they are getting their products and services at the right price, on time, and at high quality, while also juggling external policies and pressures, such as sustainability and diversity in the supply chain.
Simply put, Hogg explains that it will be agility that will help organisations to navigate such a complex market: “It is important to never accept the status quo, while understanding when to double down on trusted supply chain partners and really trying to be customers of choice.”
He adds: “It’s a common trait that we’re seeing these days. Organisations are striving to guarantee the continuity and the depth of their relationship with existing suppliers, whilst also being flexible, easily adaptable and ready to change rapidly, so I think it's a bit of a combination. Doubling down on existing relationships but also being very agile on pivoting and establishing new ones.”
Supplier management demands a dynamic approach
Despite the responsibility for managing third-party suppliers, and driving transformation and improvement always being a part of the procurement function, it has taken the disruption of the last few years to truly see a shift in view. Procurement as a function has talked for decades about being at the top table and having executive board level representation and so on and now is the time that organisations are appreciating what procurement and the supply chain does,” says Hogg.
Today, procurement is now being viewed as a strategic enabler by many, but for those that don’t Hogg warns: “If procurement isn’t now being given the appropriate levels of representation at a senior board level, then something’s really wrong. Procurement is the function that should be driving, managing, transforming and improving the relationships with third-party suppliers.”
For those trail blazers leading the way when it comes to strategic supplier management, Hogg highlights a key trend: “Organisations are truly doubling down on their existing supply chain and supplier relationships.”
This trend is being driven by the need for supplier sourcing agility in response to product innovations, new market entries, geographical presence, and risk mitigation. Whilst perhaps not a new revelation in how to approach supplier management, the last few years have put a laser focus on how critical such activities are.
Another key trend Hogg is seeing in the market is the concept of a 360-degree view of information: “A lot of procurement and supply chain organisations have always held information regarding suppliers but what we’re seeing coming to the fore, and particularly where Scoutbee positions itself, is a true 360-degree view of not just the information that an individual organisation itself holds on a given supplier, but enriching that with external content and information.”
He adds: “You can make decisions without data. No matter how experienced an individual or an organisation is, if they’re making strategic decisions without data then it’s unlikely they’re able to assess all of the various pros and cons of making such a decision without evidence-based decision making.”
Harnessing data provides a foundation for leaders to validate their advice and decisions. It also allows for greater traction and collaboration to drive much more strategic transformation programmes.
Putting suppliers at the centre of procurement strategy
Critical to any organisation regardless of its operating sector, is the need to manage suppliers and spend. “The amount you spend with third-party suppliers can account for up to 80% of the revenue of an organisation,” says Hogg.
He expands on the critical importance of spending money with the right suppliers, but also understanding the ways in which relationships with suppliers can be leveraged to support the organisation's strategies and initiatives.
“When an organisation is spending a lot of money with suppliers and is potentially a strategic customer for them, then typically, these are suppliers who will listen and want to align with the strategic direction of that organisation. As such it’s not just in the hands of how much revenue or income is being distributed to third-party suppliers but what that means when it comes to the balance of power, and the positioning of lots of potentially softer - but hugely important - strategic benefits that can be driven out from the relationship,” concludes Hogg.