Procurement professionals need to become more proactive in assessing the resilience of supply chains in the wake of the coronavirus outbreak.
Muhammad Sikander Saleem Khan, senior procurement officer – exploration and subsurface for United Energy Pakistan (formerly BP Pakistan), said a two-pronged strategy was required to turn coronavirus “from a crisis to an opportunity”.
Khan told SM: “Over the years focus of most supply chains has been increasing profitability rather than implementing the triple bottom line approach (people, planet and profit) in true spirit.
“Pandemics have always been a part of human civilisation but it is deplorable that we have never considered them as a key impacting force in our supply chains. The best we have done is try to cover it in our general understanding of force majeure.”
He added: “The best part of any crisis is that it exposes the weak link of your supply chain.”
Khan’s strategy is:
1. Disaster recovery and business continuity
“We should have a clearly defined disaster recovery plan not just for natural crises but also for biological pandemics. It shouldn’t be some fancy model that we all aspire to implement one day. Instead we should try to implement it throughout the value chain,” he said.
“Supply chain professionals need to become much more proactive in assessing how sustainable their supply chains are by simulating shocks like pandemics through scenario analysis and stress testing.”
Underlying tactical approaches:
• Implementing World Health Organization guidelines in health, safety and environmental policies throughout the supply chain.
• Identifying the key limitations and parameters of the supply chain.
• Updating definitions of force majeure.
• Avoiding disputes by choosing your supply chain partners wisely.
2. Portfolio analysis
“Supply chain professionals need to assess what sort of returns are they expecting to achieve through sourcing from fewer destinations (bundling ordering),” Khan said.
“Every organisation should evaluate what level of returns they can forego to achieve diversification. For instance, sourcing all raw materials from one location for lowest possible cost compared to achieving similar supplies across the globe. Diversification can be done at continental or country level.”
But he warned: “In the short term it will be very difficult to convince the business stakeholders to give away the returns they are used to achieving through conventional approaches like economies of scale.
“Category management is one of the most effective tools that supply chain professionals can use to achieve this objective.”
Underlying tactical approaches:
• Set targets for various levels of supply chain diversification: continental, regional, country and provincial.
• Set inventory levels to support your business operations. The more limitations one supply chain has, the more safety stocks you should keep.
• Set the expectations of shareholders and stakeholders around the returns they can realistically expect with supply chain sustainability.
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