The COVID-19 pandemic is the top headline and primary topic of discussion across the world for good reason. In procurement and supply chain, the global pandemic is creating very real and immediate challenges to maintaining a company—and an economy’s—forward momentum. According to a survey conducted by the Institute for Supply Management (ISM), “almost 75% of U.S. businesses have experienced supply chain disruption as a result of the COVID-19 outbreak” and “44% of respondents do not have a plan to address supply disruptions from China, of which the majority have experienced disruption.”
Organizations without a strong sourcing program, one which captures and stores data around not only winning suppliers but secondary and tertiary options, are facing shortages and sometimes outright halts in production. What do you do?
1. Identify your operational vulnerabilities
Which parts and/or services are critical to your business operations? Hopefully, you have already worked with your risk and business continuity partners to identify the third parties on whom you are reliant, but if not, this is where to start. Reach out to your business lines, especially executives on the front lines, and inquire about concerns. Where are inventory levels running low? Where is demand significantly shifted? Have they already seen potential supply chain failures?
Identify the “hot zones” and get ready to get tactical. Category and commodity strategies may need to shift to accommodate immediate needs—be prepared to be reactive as the need arises. You may want to shift personnel from longer-term sourcing projects to support this immediate need, collecting requirements.
If the supply chain disruption is significantly impacting your organization, it may be helpful to provide a central intake for supply chain concerns so you can prioritize requests. Some example questions to ask in addition to requirements might include:
- My item is (out of stock, running low)
- My service is (unavailable, unreliable)
- This is (slowing down, stopping) production
- This (does, does not) present an immediate safety issue
- This (does, does not) present an immediate regulatory violation
- I (have, do not have) an alternative provider available
2. Look backward
If you have been sourcing key items for a significant amount of time, now is the time to dust off your old RFPs and look at the runners-up and losers for your key goods and services. Every sourcing event you don’t need to recreate, or can use shortcuts for, will save time and energy. We often think about RFPs as having value only during the purchasing process, but querying those older events now can provide you pre-built backup plans that only need refreshing.
Ideally, you have a system or tool that captures all RFPs, RFIs, and RFQs in a central location which can be easily queried and delved for data. If not, add that to your “wish list” and lessons learned for next time.
3. When in doubt, source it out
“When in doubt, source it out” is always my motto, but even more so when the doubt is supply chain disruption and a lack of continuity.
Now is not the time for complex, 600-question requests for proposals that take weeks to design and score. You need to immediately launch a significant number of requests for quotes, ideally from suppliers who are already onboarded to your payment systems. Keep it as simple as possible—you want to know price and availability, and if the supplier provides an exact match for the item or service, or if what they propose is an alternative solution.
Engage your legal, risk, business continuity and audit teams. Teamwork is essential to determine the best overall course of action. Sometimes, the risk of stepping outside the standard source-to-pay process is far outweighed by the risk of a supply chain failure.
The technology exists to accelerate and automate the tactical sourcing process. Completing hundreds of RFQs using email and phone calls, is possible but will require significant personnel at a time when resources are constrained.
4. Look down the chain
In addition to pricing and availability, try to look down the supply chain. If your secondary distributor for key item sources from the same manufacturer as your primary, you may have less redundancy than you realize.
True supply chain diversity goes to fourth and fifth parties. If you can ask these questions ahead of time, you stave off future problems.