How three quarters of procurement improved resilience in response to Covid

Procurement has improved resilience across all sectors in response to Covid-19 impacts regardless of supply chain visibility, according to a new survey.

It found 74% of respondents believe their organisation has become more resilient post-pandemic, despite only 13% saying they have a fully mapped supply chain network. 

The report, Procurement and supply chain resilience in the face of global disruption jointly produced by Deloitte and CIPS, involved a survey of 468 procurement professionals from across the world.

Respondents revealed that in the face of extended periods of disruption due to Covid, lockdowns in China, the war in Ukraine, and fall out from Brexit, they had taken decisive action to improve resilience in their supply chain functions.

In contrast, few (13%) said they have a fully mapped supply chain, and 71% said they have limited or no visibility beyond their tier two suppliers.

Top issues cited by participants included the economic downturn and deflation, the continuing effects of Covid, and supplier resiliency/continuity. However, respondents reported five preferred methods for improving resilience even without end-to-end visibility.

Key methods to improve supply chain resilience: 

1. Dual or multi-sourcing

For many organisations, reliance on just-in-time supply chains proved impossible during the pandemic. The impact was particularly pronounced for industries such as manufacturing, which were reliant on the timely arrival of goods. The survey found 82% of manufacturing and engineering respondents had increased dual or multi-sourcing over the last five years.

In response to Brexit, one respondent said: “The delivery, manufacturing and supply of key materials can be de-risked via multi-sourcing.”

Another respondent in the oil and gas sector reported their organisation was “buying more local in all the operating units and growing the supplier base to mitigate risk in supply disruption”. 

2. Both outsourcing and insourcing

For some, the disruption was exacerbated by high levels of outsourcing to at-risk geographies. This led to 38% of manufacturing and engineering respondents to bring operations in-house. Insourcing levels were also more pronounced in the public sector, with 40% of public procurement professionals insourcing operations.

However, for some organisations increasing outsourcing allowed them to move the responsibility for low-value-add services away from the organisation to an expert supplier. The survey found the top three functions performed by outsourcing providers were IT (54%), finance (44%) and payroll (32%).

3. Diversify supply and production

Under 40% of survey respondents have entered into new supply markets to mitigate risk and strengthen continuity of supply, and to become more competitive. Difficulties surrounding diversification, however, include fundamental inflexibility, as in semiconductors, where 40% of global supply comes from China.

4. Restructure procurement functions

Around 45% of respondents have restructured their procurement and supply chain functions, the survey found. In the public sector this fell to 35%. However, of the respondents that had restructured, 61% said they now felt more prepared for future disruptions. 

Anna Spinelli, CPO at Deutsche Post DHL, said: “Procurement needed to become much more strategic and relevant at a global as well as local level. We focused on building scale, skills and standards; in particular we built up expertise centrally, through a strong governance function, and share that knowledge across the organisation. 

“There is a big trend around multi-disciplined agile teams with a plug-and-play approach but in my opinion the category and supplier expertise across divisions and markets is still the best approach to build a competitive and sustainable ecosystem of suppliers. Our plan is set and its execution is in full swing.”

5. Supply chain visibility

The survey responses showed that beyond Tier 1 suppliers, most organisations lacked supplier visibility. Only 13% of respondents stated they have a fully mapped supply chain network, and the vast majoirty (71%) have partial or limited visibility beyond Tier 2.

Thomas Udesen, CPO at Bayer and co-founder of the Sustainable Procurement Pledge, said: “First of all, the ones who say they have full visibility are misguided – the maths is just impossible. You can focus on certain areas to build a pretty good idea of the full picture, and that is what we do. We have been using technology to map supply chains as deep as we believe we can.

“For critical medicine (where people may die if they don’t get it) – we have our strategic portfolio review and have identified particular risks where we require full insight. Here we go very deep, delve into the details and ensure that we have 360 degree resilience mapped into our systems landscape.”

Beyond the five key points the report also recommended longer term methods for increasing resilience, such as increasing focus on supplier relationships and contract management, recruiting and retaining talent, and upskilling, and investing in enterprise resource planning and risk management software and end-to-end supply chain management technology. 

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