By Ilija Ugrinic, UK Market Director of Proactis
Optimism is in the air. With more and more Covid-19 vaccines arriving and vaccination programmes around the globe underway, economies will start to re-open and international trade should start to rebound.
But with new variants of the virus emerging, and delays to the vaccine supply chain as well as a variety of logistical difficulties in its delivery to populations, it is important for businesses to take an agile approach. Indeed, the World Trade Organization’s latest Goods Barometer suggests that world trade might start to lag again as these types of issues continue to arise[i].
So how should businesses prepare for continued uncertainty, even as things start to look more positive?
This question is particularly pertinent to supply chains. As economies open, businesses need to consider whether the pre-Covid supply chain is appropriate for these new circumstances. Will changes made during the height of the pandemic be suitable as we enter a new phase in the pandemic? Will regional variations in Covid restrictions require more flexibility? Can organisations still adapt quickly, or have they settled into a new routine?
Procurement teams should start by looking at supplier contracts. Pre-pandemic contracts have often proved insufficient when tested by the challenges posed by Covid-19. It is important to remember that not only has your business changed in some way due to the pandemic, but your suppliers’ businesses have changed, too.
When re-engaging a supplier or continuing work with an existing supplier, now is a good time to take a second look at the contract to consider whether any changes should be introduced. Depending on how fit for purpose the contract is, it might be necessary to re-negotiate a contract in its entirety. This could not only to protect your business, but a strong commercial relationship that has taken time to build.
Unfortunately, many businesses have not weathered the coronavirus storm, and some of these businesses may be located within the supply chain. If you need to replace a supplier, consider again whether pre-coronavirus strategies, or even 2020-phase strategies, are still fit for purpose.
While it is never a good to lose a reliable supplier, when this happens, it can be the perfect time to make change. When sourcing a new supplier, consider how to reduce risk and mitigate against potential future disruption.
Could you work with a higher volume of suppliers, to spread the demand across multiple companies? Or is it worth re-thinking where the suppliers are located – in pandemic times, would a location “closer to home” make more sense?
Zara’s owner, Inditex, has recently heralded[ii] the idea of “proximity sourcing” for helping the fashion giant weather the pandemic, with an existing reliance on suppliers closer to its headquarters and in a number of regions, enabling the business to weather the pandemic and some of the supply chain issues it has posed better than Zara’s counterparts.
Many things have digitised during the pandemic, and procurement is no different. Digital services can enable more informed, lower risk processes for remote supplier onboarding.
For example, we provide our clients with supplier qualification tools to gain a thorough understanding of supplier capabilities, certifications, policies and procedures. Once qualified, sourcing and supplier selection tools can then evaluate suppliers for their ability to deliver a particular set of products, or to perform a particular project or service.
The supplier qualification and selection tools integrate into a central supplier directory, automated supplier and contract monitoring and supplier self-service profile maintenance, all of which increase the level of visibility a business has into each supplier’s ability to perform and the likelihood of a problem. This visibility, created through integrated digital platforms, can help further reduce risk, which is crucial when certainty is hard to find.
The prospect of global economic reopening is real, and hugely exciting for businesses that have been stalled by closures and disruptions over the past year. But this prospect does not come without risk, and trading internationally may not immediately be as simple as turning the lights back on.
A good evaluation of the supply chain now, with steps taken to minimise risk, will help prepare businesses for further uncertainties that will inevitably arise in the coming months.
Global Banking & Finance Review
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