The topic of building business resilience during difficult times, such as COVID-19, is an increasing concern in the supply chain. This unprecedented pandemic has proven that efficiency alone in business operations is not enough to stay resilient.
For decades, businesses have focused on a strategy called ‘just-in-time,’ which basically means only ordering and receiving just enough materials and products that they need for a short period of time from suppliers to minimize costs. But as the COVID-19 has made painfully clear, it has a major flaw: that strategy doesn’t help businesses build resilience.
Therefore, plans must change in ways that help businesses survive through crisis times and stay resilient in the long-term. And now is the time to consider shifting your strategic thinking from just-in-time to just-in-case.
In this blog, we will show you three ways to successfully and effectively make this switch by focusing on procurement.
But before digging into that, what do I mean by saying ‘just-in-case’ strategy?
As per definition, Just-in-case (JIC) is an inventory strategy where businesses keep larger standing inventories to prioritize risk management. In other words, JIC stocks up inventories ahead of time.
- Multi-sourcing:
Many of you may still remember the major natural disaster in Japan and Thai in 2011, which caused the supply chain disruption across the world and exposed businesses’ vulnerabilities as relying on a single source of supply.
In response to these global events that threaten the supply chain disruption, multi-sourcing starts gaining popularity and becoming a part of the procurement strategy to mitigate risk and gain competitive advantage. The ultimate goal here is not to let a business depend on any single vendor.
To optimize a multi-sourcing strategy, supply chain leaders must know suppliers and their networks. By doing so, you will easily categorize and monitor your suppliers not only by spend, but also the revenue impact if a disrupted event occurs. Besides, many companies use multi-sourcing to help lower the prices. If you lock your firm in a single vendor, negotiating for better prices will be more challenging to remain competitive.
However, there are drawbacks that a company can experience from multi-sourcing. One of the biggest ones is increasing its complexity of the arrangement. As a result, businesses embracing this strategy need to strategically rethink which resources they allocate to the critical task of supplier lifecycle management and how to make it more efficient.
Fortunately, the power of AI does change the game. The hassle multi-sourcing processes are now automated and handled efficiently. For example, our SupplierGATEWAY pre-qualification tool allows you to pre-qualify and filter suppliers based on your customized business rules. Besides, you can conduct online bids to get the best prices from your list of potential suppliers, and of course – everything is automated. Your only task is giving us what products or services you need.
- Network Diversification:
The U.S. – China trade war has negatively impacted the economies of both the United States and China. In response, many companies have begun to diversify their sourcing and manufacturing bases by looking for suppliers outside of China. Diversifying the supply chain will ensure you have a diverse supplier base, no matter what problem may arise. Also, a business is more likely to have the greatest possible choice of goods and services. According to the BCI Supply Chain Resilience Report, supply chain disruptions can cause significant damaging losses in terms of finances (62%), logistics (54%), and reputation (54%). This means the cost of disruption can be seen more as a cost of doing business.
With the global network of 500,000+ active registered suppliers, a business can utilize the SupplierGATEWAY strategic sourcing tool to quickly identify prospective suppliers through our advanced search criteria and get all information you need from suppliers. Did I mention you can even search for suppliers with our mobile app?
- Build a Robust Procurement System:
The current pandemic has exposed the fragility and thin margins on which many global businesses run. Companies have realized that encouraging procurement teams to pursue efficiency by cutting down inventory costs and freeing up cash flow has negatively resulted in robustness, resilience and effectiveness. Therefore, the challenge of effective supply chain management is to find agile solutions and find the balance between ‘just-in-time’ and ‘just-in-case’ processes while reducing risk as much as possible.
Today’s sourcing is being asked to move quickly to source the company’s raw materials or products. It’s a time-consuming process, not including for buyers to manage and improve relationships with vendors and optimize the performance. SupplierGATEWAY procurement solutions allow a business to automate the process involving purchasing materials and products, managing the inventory, easily select and order a product, managing invoices, pay bills electronically and many more. In other words, the message we try to deliver here is ‘Get More, Do Less’ by automating your purchasing process.
We’re excited to tell you more! Contact us today!