The pressure is on businesses to prepare for the new normal and adjust to new patterns of work, demand and supply. ‘Procurement’ has been a word on many peoples’ lips recently, but it has far wider importance to business models than just sourcing bits of kit. Viewing the current situation from a procurement specialist standpoint, it is possible to identify 5 key procurement issues for SMEs and food businesses which they need to be concentrating on now to ensure they thrive in the months ahead.
Supply Chain Resilience
It has been remarkable that, even allowing for panic buying, supermarket shelves have remained relatively well stocked over the past couple of months. However, all manufacturers have had to compete for supply of ingredients and packaging, with SMEs in particular losing out to their larger competitors. Those supply chains will remain disrupted, with Nestle CEO Mark Schneider warning of supply chain challenges expecting to intensify.
At the same time, consumers are engaging with food in a different way, and this may offer opportunities, particularly for challenger brands who can reflect these consumer demands in their brand promise.
Now is the time to
- Simplify where possible, by reducing the links in the chain and improving efficiency and effectiveness.
- Identify contingency options – suppliers, products, and their geographical locations. Too much reliance on one country is risky
- Ensure your sourcing delivers on your brand promise, particularly in the context of changing consumer behaviour which is placing more emphasis on issues such as environmental, ethical, and local factors.
Strategic Relationships
Current supply chain constraints have caused many manufacturing organisations to challenge product specifications and production plans. It is a time to re-evaluate the procurement role. A proactive procurement specialist is able to harness buyer and supplier expertise and promote engagement at multiple points, including planning, new product development and the quality assurance and technical roles. The outcomes can be across the board – more rapidly developed reliable production plans, successfully changed product specifications, and alternative sources of inputs and raw materials. Challenging the status quo can be used to achieve more widely shared business objectives with high level support within the organisation, clear responsibilities and regular engagement.
Energy Costs
Who would have predicted that US oil prices would move into negative territory? Yet a similar event has happened in the UK electricity market because wind and solar products produced a surge in clean energy whilst demand has fallen 10% due to the lockdown.
Oil prices have recently experienced a recovery. With other cost pressures likely to increase, now is the time to
- review your energy contracts. Depending on when you last agree contracts, you cold be making savings of 20% or more
- ensure reductions in energy and other input costs are reflected in your suppliers’ pricing.
Analyse Spending
“In times of change, learners inherit the earth, while the learned find themselves beautifully equipped to deal with a world that no longer exists” commented Eric Hoffer . Now is the time to learn about your spend by forensically analysing line by line and comprehensively understanding the linkages, opportunities, and relationships. Be a learner…
As a foundation, use this period to get your spend data into a format that allows you to
- easily see what the organisation buys, where it buys it from, how much it bought, in which products it is used, and how much it paid.
- measure procurement performance to budget.
Maintain Perspective and Act Responsibly
Recovery will come, there will be a return to some sense of normality, and actions you undertake now will have an impact on your business going forward. Building and nurturing the new-found closer relationships and ways of working with internal and supply partners may deliver game changing competitive advantage.
For help in preparing your business for the return to normality, contact Naveen here for expert advice and guidance on all business development and procurement issues for SMEs.