As the ongoing coronavirus pandemic and the end of the Brexit transition period are set to continue to impact supply chains, SM rounds up the key procurement trends expected to emerge in 2021.
1. Risk and resilience
Covid-19 had an unprecedented impact on supply chains in 2020, with disruptions hitting firms around the world. As a result, managing risk and resilience will continue to be just as important in the upcoming year.
Richard Howells, VP, solution management for digital supply chain at SAP, said: “In the coming year, we’ll see a greater shift to more resilient digital supply chain models as businesses focus on expanding or transforming capabilities to enable greater responsiveness to continuous disruption, demand changes and uncertainty, and real-time scenarios.
“In an effort to reduce costs, companies have globalised supply chains and, as the pandemic has shown, increased risk. Companies have started to introduce more risk mitigation strategies, and this will continue moving forward. Alternate sourcing strategies, inventory optimisation, and balancing onshoring, nearshoring and offshoring, to name a few.”
Shanton Wilcox, US manufacturing lead at PA Consulting, added: “A longer-term trend to watch is reshoring. There are several reasons companies are considering this strategic move, ranging from global tariff instability, regional disruptions to political assurance of continuity of supply. The degree of reshoring will vary widely by industry and its exposure to these risks, and therefore the benefits to be gained from redefining global operations networks.”
2. Brexit continues
The Brexit transition period ended on 1 January 2021, and while a new deal between the UK and EU has been agreed, logistical challenges remain. The UK government’s own worst-case scenario estimated there could be 7,000 trucks queued in Kent trying to get across the Channel. As a result, procurement professionals will need to be ready.
John Perry, managing director of consultancy Scala, said: “We must primarily consider the economic fallout from 2020. A growing proportion of the population is now in financial difficulty, putting pressure on price points.
“This economic shift, alongside the ongoing move to online and home delivery, will worsen retailers’ margin challenges, while they contend with the increased need to compete on price to retain sales. This cost squeeze is in turn likely to trickle through to suppliers, meaning that we may see businesses look to minimise costs across their supply chain and logistics operations.”
David Savage, regional manager at Geotab UK and Ireland, added: “The challenge of Covid has once again just shown how resilient small businesses are in the face of adversity. Brexit is another challenge that will be overcome though it will not be without it’s difficulties. The greatest complexity will be faced by those haulage and logistics firms that rely on the gateways to Europe.
“Outside of the legislative fog, I would anticipate that truck and van fleet owners will be doubling down on operational efficiency. That is to say the focus will be on vehicle and driver efficiency. Business will need to be run to leaner degrees than ever before.”
3. Firms will need to support smaller suppliers with prompt payments
The ongoing disruption from Covid-19 and Brexit will also be a major risk for suppliers, particularly small businesses.
Ian Thompson, UK general manager at Ivalua, said: “Failure of key suppliers could prevent organisations from delivering the products and services they need to customers, so they must provide transparency into when suppliers will be paid, and pay them on time to give them a fighting chance to survive. This will boost the wider economy while building strong relationships with suppliers – helping organisations to collaborate more effectively and work together to find new revenue streams.”
4. Focus on environmental practices will return
Environmental issues may not have been a priority for some firms in 2020, and research showed six in 10 UK businesses lowered investment in sustainability initiatives following the Covid-19 outbreak. However, environmental pledges being made by countries around the world mean that green projects are likely to be pushed front and centre by firms in 2021.
Thompson said: “At the start of 2020, sustainability initiatives were picking up steam, but Covid-19 slowed progress. But on the geopolitical stage sustainability will be a major issue in 2021, with the Climate 21 Project in the US set to be backed by president-elect Joe Biden, and the UK pledging to wipe out its contribution to climate change by 2050.
“As sustainability continues to be a focus, organisations need to ensure they are following green practices. Businesses must address supplier visibility issues and make sure they are putting the right tools in place to drive environmental change internally and beyond, empowering suppliers to do the same.”
Perry added: “Environmental concerns will once again be high on the agenda. Increased home deliveries in lockdown and fluctuating traffic levels have thrown a spotlight on businesses’ carbon emissions, meaning that finding ways to sustainably cut emissions, without compromising in areas such as service quality, will rightly be a key priority for many.”
5. Organisations will face increased pressure to root out poor labour standards
Thompson said: “This year’s UK government report on modern slavery found more than 10,000 potential victims were identified in the UK. And an indirect supplier of fashion retailer Boohoo was reportedly paying workers less than the minimum wage. Next year, businesses will likely face more pressure to identify modern slavery in their suppliers – but also their suppliers’ suppliers – too.
“As such, organisations need to improve visibility into labour practices across their supply chain in 2021. This will help firms identify responsible practices for direct suppliers, but also for indirect tier two and three suppliers, reducing their risk.
“By scrutinising suppliers and their partners, organisations can put policies in place to ensure they only select those with the best labour standards. This will make a clear statement that exploitative practices won’t be tolerated, while also making high labour standards a key differentiator for suppliers looking to work with you. In turn, this will force other suppliers to follow suit and become a real force for change.”
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