Honda's recent production halt shows the risks 2021 supply chains face © ADRIAN DENNIS/AFP via Getty Images
Honda's recent production halt shows the risks 2021 supply chains face © ADRIAN DENNIS/AFP via Getty Images

Eight procurement leadership themes for 2021

Will Green is news editor of Supply Management
15 January 2021

The pandemic has “thrown out the rulebook” for organisations with global supply chains and a new one is needed, according to a report.

GEP’s 2021 Outlook Report looked at the priorities that will dominate in 2021, including risk reduction, diversity and inclusion, and sustainability.

John Piatek, vice president, consulting, consumer goods and retail, and chairman of the Thought Leadership Council at GEP, said: “This report provides companies with a new playbook to come to grips with a post-pandemic cost structure and supply chain uncertainty.”

GEP’s eight leadership themes for 2021 are:

1. Supply chain leaders must invest to remain resilient and reduce risks

The key to resilience will be visibility and close collaboration. Visibility of suppliers will be critical and customer visibility will allow for better demand forecasting.

“Managing effective supply chains is no longer only about lean processes or the lowest cost,” said the report. “The breakpoints are commonly found in the conditions of supply connections that occur in real time.

“In the year ahead, procurement and supply chain leaders need to invest in making those connections seamless and resilient — without losing the advantages of efficiency.”

2. Supply chain network strategies are changing amid sourcing complexity

The essential questions are whether to reshore, nearshore, stay offshore or dual source. However, firms can expect more supply chain complexity as a result of reducing risk.

“The events of 2020 might prompt some firms to trade one value type, such as cost, for another, such as speed or consistent reliability. By diversifying supply sources or distribution channels, businesses increase overall supply chain complexity,” said the report.

3. Essentialism has been redefined for procurement and supply chain leaders

The pandemic has “pushed firms to the limit” and thrown into question ways of working. Home working has become the norm for many and technology has become a much greater part of the working day.

“In many cases, these digital options significantly improved processes, eliminated unnecessary manual and physical tasks, automated paperwork and supercharged productivity.”

4. Sustainability is finally a board-level topic and sustainable procurement is the key

Expectations are higher than ever for businesses to make sustainability a priority. Procurement decisions must be make not simply on economic criteria but also the implications for society and the environment, and suppliers must chosen who make make sustainability a core value.

“Procurement leaders need to define a sustainable procurement strategy and align sustainability goals with the executive team and related functions, such as finance and new product development.”

5. Diversity and inclusion should be hardwired into procure-to-pay processes and technologies

In 2021 procurement and supply chain leaders will need to do more to achieve real targets for supplier diversity, obtaining executive buy-in and possibly establishing diversity and inclusion councils to create clear goals.

“Diversity and inclusion goals are generally substantial and ambitious. To truly realise these objectives, metrics need to be tracked and benchmarked at the transaction level within a P2P platform.”

6. A post-pandemic strategy requires a post-pandemic cost structure

Procurement professionals should consider demand sensing to manage inventory and distribution in real time, purchasing only when there is demand and capacity. Savings from suppliers should be linked to their contribution to innovation and revenue.

7. Budget-to-pay will unify finance and procurement under one model

Leaders have a unified model that connects budget availability with real-time spend decisions and payment authoritisation.

“Known as the budget-to-pay model, it can be aligned to turn the levels of spend on and off when global and local economic conditions require.”

8. Substantial procurement and supply chain activities can now be automated

The pandemic has accelerated the trend to automating tactical work, but it must be coupled with human insight into category demand and the impact of a lingering recession.

“In 2021, automation will help streamline processes and allow smarter collaboration in core procurement and supply chain activities.”

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