How the Covid-19 pandemic has impacted hiring across Procurement & Supply Chain
Exploring the challenges faced by supply chain & procurement professionals during Covid-19, and how businesses have adapted to find solutions.
The Covid-19 pandemic has had a significant impact on the supply chain, which has had a knock-on effect on how teams within the supply chain function and recruit.
Speaking with several procurement and supply chain leaders, two main challenges became apparent. One challenge was the insolvency and temporary closing of suppliers, which caused supply limitations and delays in meeting customer demand. The second challenge was the decline in sales and reduction in margins, which hatched a difficulty in trying to stabilise balance sheets through this period.
Despite these challenges, procurement and supply chain teams have worked tirelessly to find solutions to overcome these challenges and continue to bring success to their business. A solution that was proposed by a supply chain leader in the Automotive industry for the insolvency of suppliers was to insource by purchasing all the equipment needed to manufacture this component in-house. Although this could raise further challenges, this solution would ensure businesses are able to continue to manufacture the parts and products they need to reduce delays and meet customer demand.
To help stabilise balance sheets, a solution that was proposed by a procurement leader in the e-commerce space, was to optimise and consolidate the supply base by identifying contracts that were affected by change in demands and extract value where necessary. For example, facilities management contracts is an area that could be optimised due office lockdowns and the new ways of working for many businesses. Maximising savings in these areas will help businesses avoid a reduction on personal costs such as laying off workforce.
Clearly, the Covid-19 pandemic has brought new priorities to the forefront for supply chain teams. As a result of businesses implementing solutions to tackle the challenges above, it has changed the way teams are functioning and, in some respects, helped businesses identify areas where they may be lacking in skill.
When analysing insourcing as a solution, it’s implementation can impact team functioning as this would require the business to internally reshuffle and train their present operations teams on the new equipment and manufacturing process. This could inadvertently put more stress on the supply chain by reducing workflow efficiency as the additional tasks would add to their existing responsibilities. Alternatively, after an assessment of the departments hiring budget and commercial viability during this period of uncertainty, a business could recruit and build specialist teams to cover the added work.
Overall, insourcing brings with it advantages for the business and for the team as it helps to create leaner manufacturing processes and streamlines product development, which can help to improve planning and forecasting. For supply chain teams, this can be beneficial as it gives current employees greater opportunities to learn new skills and it improves the local economy by potentially opening up new job roles in the area.
During this uncertain period, optimisation and consolidation of the supply base is a key solution for many businesses to avoid significant workforce reduction. However, much like insourcing, new challenges can arise such as reduction in supplier diversity, flexibility and innovation. According to Spend Matters, research shows diverse suppliers that offer “greater flexibility, better hands-on support, lower cost structures, more creative resources” tend to be smaller suppliers and having a heavily optimized supply base can restrict businesses from accessing this wider variety of smaller suppliers. This is an issue as businesses and customers are becoming more diverse and if the ultimate goal is to bring value to your organisation and stakeholders, it makes sense that the supply base for the organisation should reflect this global demographic.
Although, the exercise to consolidate and optimize the supply base will help to identify areas of improvement in the team such as the need for an upgrade in agility costing and working outside a set action plan to deliver on targets. Additionally, it will help teams to hone focus in on building stronger strategic relationships with existing suppliers where you can understand their pain points on capacity and inventory to allow for further negotiation and cost reduction.
Ultimately, the Covid-19 pandemic has had an impact on how supply chain team’s function, if businesses are successful in implementing these solutions, as evidenced in this blog, it will create new opportunities for organisations to be more competitive in the market. Examples include a stronger strategic supply base following the need for optimisation and consolidation of their suppliers and opportunities for employees to learn new skills in new equipment or even handling new procurement categories such as medical wear and personal protective equipment for staff. For the future, the Covid-19 crisis has taught teams to become more agile and to work outside of their action plans, in order to continue to hit their needed targets and key performance indicators.