How will lessons learnt from the pandemic improve supply chains in the long run? Our Procurement & Supply Chain Innovation report looks at how supply chains are transforming through technology and transparency and how procurement in the public sector can be a force for good.
The procurement and supply chain ecosystem was ravaged by supply shocks in the last year due to the COVID pandemic. Although the impact of COVID was typically negative, it helped to expose flaws in organizations’ supply chains which could now be patched and improved.
Rethinking Procurement and Supply Chain
The aftermath has led to most companies rethinking their procurement and supply chain strategy. It serves as an opportunity to start fresh and implement the radical new ideas that might have been regularly delayed previously. The pandemic has also emphasised the importance of data for organizations, specifically in demand management. In the NHS, the supply shock was initially very disruptive, but this forced them into investing in a new demand management system and purchasing portals as there were no centralised catalogues or ordering systems.
“There is an explosion of new risks that must be managed. Several supplier risks have come into focus in the last 12 months, including environ- mental, social and corporate governance (ESG) risk and reputational risk. The industry is at an inflexion point where there is a need to rethink how to make supply chains sustainable because they are being forced to expand due to the changing dynamics.”
Charles Minutella Head of Due Diligence, Refinitiv
Renewing Sustainable Procurement
With the onset of COVID-19, came a renewed focus on sustainability strategy. The sustainability requirement is increasing through stakeholder demands, a key-way to embrace this shift and to champion sustainable procurement and supply chain is to change the way the organization interacts with its supplier; and not just tier-1 suppliers. Relationships should move from transactional ones to strategic. Strategic relationships can help drive innovation further. This ability to drive innovation through procurement has not always been recognised in organizations but post-COVID, this opinion has changed. The dialogue between suppliers and the organization needs to be two-way, working together with suppliers is critical especially when expectations of the supplier are on the rise. If a supplier does not immediately meet new requirements, it is often better to work with them to improve their capabilities than to drop them for a new supplier.
“No single company can build a sustainable supply chain by themselves; it’s about collaboration and partnership across the entire value chain. Until a couple of years ago, we would never bring competing suppliers in the same room, but now discussing together how to make our collective supply chain more sustainable is a source of innovation.”
Ingrid De Ryck CPO and Sustainability Officer, Anheuser-Busch
Resetting Social Value
When it comes to public sector procurement, the UK has not previously included the requirement for social-value as a weighted decision factor. This new provision helps put a focus on the community good a project or new supplier can provide, this follows a growing trend of social purpose within organizations where pressure from shareholders, stakeholders, customers etc is prompting firms to think more about the impact of what they do on the local community. Although it is a popular new decision point, to be able to quantify ‘social-value’ is difficult as it cannot be directly measured like savings. By implementing social-value into decision making, both in the public and private sector, it prompts suppliers to positively change the way they operate in order to remain competitive and eligible for tenders based on the changing social-value requirements.
“Research data shows that more than 85% of the millennial population want to invest in and work for companies that are showcasing their ability to respond to environmental and social factors. When you have programmes in place that drive sustainability, and diversity and inclusion, specifically around the supply chain, you’re showcasing your company to that up-and-coming talent and to those investors.”
William Holmes, Head of Supplier Diversity GSK
On the back of discussing social-value, it is important to consider accountability in the supply chain. Accountability is often achieved through transparency of operations. There is a growing trend of organizations opening up their supply chain for public scrutiny. Some of these companies are Nike, IKEA & Adidas who publish detailed supply chain reports. One of the benefits of this transparency is an increase in perceived trustworthiness from the consumer base and media which can help mitigate the risk of reputational damage. Although, the issue with self-reporting is that it is hard for the average consumers to verify these claims which is why these company reports are often better received when they come with the verification of a third-party reviewer.
“60% of firms recognise transparency, cost effectiveness and being customer-centric as key gains brought by procurement and supply chain digitalisation”