Among the lessons learned during the government-ordered shutdown of the global economy during the COVID-19 pandemic, companies learned the hard way that single-sourcing and just-in-time procurement strategies do not work in times of crisis.
As a result, organizations are responding by reinventing supply chain and purchasing operations to make them more resilient, flexible, data-driven and collaborative to avoid a replay of 2020 in an increasingly uncertain future.
In addition to managing the risk of another global crisis, CEO Today notes that optimizing purchasing operations — which manage up to 80% of a company's total costs — can result in savings and efficiencies that improve the bottom line. However, the magazine notes, "seeing procurement as a core competence and value driver will involve both a cultural and a mindset shift."
This mindset shift will create opportunities for business professionals with the advanced knowledge and skills from an advanced business degree in supply chain management to develop and deploy forward-looking procurement strategies.
What Are Trends in Strategic Procurement?
Companies are rethinking their sourcing strategies to ensure resilient and efficient management. Efficient purchasing processes can yield cost savings and other competitive advantages in global markets. Trends in procurement strategy include:
Identifying new partnerships
Sustainability is a growing imperative as environmental, social and corporate governance (ESG) reporting as market demands for equitable practices and regulatory requirements become the norm. As McKinsey & Company notes, a company's ESG commitment includes the impact of its upstream partners, meaning the "procurement function has a decisive role ... in shaping an organization's ESG footprint."
Apple Inc., for instance, says more than 70% of its carbon footprint comes from its suppliers, which it intends to reduce to zero by investing in its partners' environmental training, policy development and product manufacturing.
Creating strategic supplier relationships
ProcurePort identifies three procurement relationship models: partnerships, which are typically vendors; integrated, which uses more sophisticated digital platforms to enhance visibility; and strategic. In strategic partnerships, buyers and sellers share resources, information and investments in research and development in an alliance that supports mutual success and growth. While predicting disruptions on the scale of COVID-19 is impossible, the software supplier notes, "it makes a huge difference having an experienced supplier with enough integrity to help you keep operations running."
Ensuring efficient delivery
Years after the COVID-19 onset, shipping from Asia to America takes twice as long as it took pre-pandemic, and businesses with agile procurement processes can get their purchases aboard ships ahead of the competition. At the beginning of 2022, the competition for space aboard cargo ships was so fierce that some retailers placed orders for Christmas 2022 as early as April. In cases like this, supply chain visibility helps balance the inventory/sales dilemma. But as Ryan Petersen, founder of the logistics firm Flexport, told McKinsey & Company: "Although a lot of companies claim they've solved this, that's not the case."
Procurement's primary function is identifying and managing suppliers and building long-term relationships which yield benefits beyond preventing disruptions, including rebates and pricing considerations.
How Are Supply Chain Professionals Gaining Procurement Expertise?
As a component of the supply chain, expertise in purchasing adds an advantage in the competition for management and executive roles.
Graduates of the University of North Carolina Wilmington Master of Business Administration (MBA) with a specialization in Supply Chain Management are ready for those roles. Its AACSB-accredited online curriculum focuses on procurement strategies for:
- Identifying and building relationships with potential suppliers
- Obtaining the high-quality materials efficiently
- Ensuring an uninterrupted flow of goods and materials
Procurement expertise adds value to a graduate degree in supply chain management by equipping graduates with critical insights into the impact of purchasing on competitive success and profitability.
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