Localizing Supply Chains Amid Global Disruptions

Thinking back to the onset of the pandemic, supply chain disruption was one of the immediate commercial concerns. And while we may have thought that vaccines would bring us out of the woods, supply chain issues continue to be exacerbated by large-scale disruptions. 

Beijing’s zero-tolerance approach to Covid-19 amid yet another escalating virus outbreak brings the pandemic full circle over two years after its emergence upended the global economy. Impending lockdowns coupled with labor shortages and border closures mean companies are losing business and supply issues mean they can’t receive stock or components of goods.

Additionally, port backlogs also remain a very real issue to many businesses in the US.  At the height of disruption, records were set when over 170 of ships were waiting off the California coast.

Indeed, when we asked major business leaders in the U.S. about their concerns for 2022, close to a quarter cited supply chain disruption as a key barrier to reaching ambitions this year – representing one of the highest concerns aside from Covid and a recession (surveyed before the conflict in Ukraine).

Managing supply chains and potential supplier risk is critical to an organization’s performance. The ongoing impact of the Ukraine conflict, with the mass exodus of western multinationals from Russia and Ukraine – combined with other supply chain and Covid-related disruptions – mean many companies are having to rethink their plans.

Lessons learned during the first waves of the pandemic, such as building resilience and flexibility into supply chains, focusing on suppliers that pose the least risk, and having alternative suppliers vetted and ready to go, are important to remember and follow.

We are seeing companies improve processes through a variety of measures. For example, our client in the hospitality sector is acquiring pure electronic invoices, managing risk assessments online, consolidating contracts that were once held in office cabinets and digitizing the collation of stakeholder sourcing. Through adopting these solutions, the hospitality company can access everything, in the same place, from anywhere.

A Silver Lining for Sourcing and Procurement

One positive impact from the pandemic was the mass digitization that transformed business operations. From increasing electronic invoicing from source and digitizing supplier risk management, companies have been able to increase efficiencies, decrease costs and boost profits. Our research also found that businesses are investing in digitalizing their supply chains, specifically to improve resilience and pursue growth.

Digital solutions can accelerate turnaround times on operations while reducing potential for errors, which help to increase retention and strengthen the supply chain. Digitizing interactions with suppliers, through processes such as invoices, payments and monitoring results, are just a few ways we routinely see digitization help businesses improve supply chains.

Indeed, businesses are using these tools across supplier management to increase efficiencies and effectiveness of business processes. They also build in resilience in the context of business continuity. Specifically, one of our financial services clients was able to better manage their purchasing lifecycle through digitalization. They were able to track, control and analyze spending to simplify and scale their spend management process, especially for supplier management.  This allowed them to consolidate workflows and reduce the amount of time and effort their staff spent to manage and maintain an optimal spend management process.

When looking at businesses that have succeeded during the pandemic, digitization has been critical. Investing in digital tools and advanced technologies creates a more efficient and streamlined supply chain. Data integration also helps the companies better meet consumer demands while sophisticated data analytics can be used to create a more streamlined and cost-efficient chain.

These tactics are advantageous to businesses looking to improve supply chain resilience, as those with highly digitized supply chains can minimize supplier communication concerns and can make faster decisions when it comes to assessing their supplier portfolio. 

Regionalization, where companies reorganize processes to utilize an existing network of suppliers, remains a priority for most companies, with many expecting to pursue some degree of regionalization during the next three years. This might cost more initially but if companies can sell closer to full price, they can completely change the game.

Of course, technology cannot work by itself. Meaningful and lasting change requires a stable blend of tools and talent. While supply chains remain an unpredictable and crucial part of business, through communication, collaboration and training, businesses and suppliers can leverage technology to weather the storm. In doing so, they can improve resiliency and business growth – no matter what challenges lie ahead. 

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