Why now is the time for procurement to 'get its house in order'

Falling global consumer demand gives procurement teams an opportunity to “get their house in order” following the long period of supply disruption, according to an expert.

Tony Harris, SVP and head of marketing and solutions, SAP Business Network, told Supply Management layoffs, the cost of living crisis and soaring interest rates were dampening consumer spending, but this would have a “positive” impact on supply chains.

“Procurement processes and supply chain issues have started to ease as demand has lessened post-pandemic,” he said.

“This and continued impacts to consumer spending give companies an opportunity to more fully recover supply chains and essentially get their house in order again. Procurement departments just have to be careful about planning for the year ahead to avoid another overstocking issue.”

Global supply chain pressure steadily fell over the course of 2022 due to “easing of supply constraints and softening of demand”, according to the Federal Reserve of New York's Net Global Supply Chain Pressure Index.

Earnings reports released this month indicated similar decongestion. In its results lift manufacturer Schindler said: “The delays caused by supply chain disruptions have somewhat stabilised in many areas, with lead times getting close to pre-Covid levels.”

Carmaker O’Reilly Automotive also saw improvements in the latter half of 2022, describing how it “incrementally added inventory… as supply constraints began to ease”.

JD Sports CEO Régis Schultz said the group had been able to keep a lid on price hikes, with a small increase, thanks to easing supply chain disruption and shipping costs.

Harris said: “During this restocking period, companies can refocus resources on making their supply chains more resilient by evaluating supplier risk, not only tier one suppliers, but tier two, and tier three as well. Many companies are only familiar with their tier one suppliers but with technology, they can evaluate their suppliers’ suppliers and their suppliers’ suppliers’ suppliers and so on. 

“It’s important to understand each company and any potential risks that they pose, by looking at geopolitical issues tied to their location, environmental factors, sensitivities around business owners. This information can help companies strengthen every link in their supply chain and minimise future risks.”

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