Agile Strategic Sourcing for a Resilient Supply Chain
Agile Strategic Sourcing for a Resilient Supply Chain
by Dr Shereen Nassar, Global Director of Logistics Studies and Director of MSc Logistics and Supply Chain Management Suite at Heriot-Watt University Dubai
As disruptions in the supply chain continue, companies are urged to take precautionary measures to manage risk within the regional and global supply chain.
Although the trend towards global outsourcing can be seen as a source of supply chain vulnerability, it will continue to grow with careful attention to issues related to the implementation and its impact on supply chain performance considering the challenging nature of the modern business environment shaped by uncertainty, change and ever-increasing customer expectations. The unprecedented growth of e-commerce has led to a greater demand for the timely and efficient delivery of goods. As a result, organisations have had to rely on a larger number of suppliers and third-party logistics to meet this demand.
Furthermore, with the increased focus on sustainability and reducing carbon emissions, organisations have to carefully select and evaluate their suppliers to meet these goals. The complexity and interconnectedness of the global supply chain have led to organisations becoming more dependent on suppliers than ever before. Reliable and responsive suppliers are key for supply chain performance and success and hence the supply chain leaders require not only a strategic approach but also an agile approach towards outsourcing.
Procurement, activities such as strategic sourcing, are one of the main processes in the supply chains that can generate a positive impact on companies by giving them a competitive advantage in the market. A recent survey conducted by Equinix, a leading digital infrastructure company, on global technology trends in 2022 indicates that around 59 per cent of IT decision-makers worldwide consider global supply chain issues and shortages as a threat to their organisation. Hence, businesses must undertake the strategic sourcing process to mitigate risks in an uncertain environment and improve retail competition.
Strategic sourcing aims to drive profitability and enhance agility through a thorough market-level analysis, detailed analysis of potential and current suppliers, as well as broad operational and financial supply chain analysis. Strategic sourcing can help supply chain leaders identify potential risk factors and develop procurement mitigation plans. Strategic sourcing plays a crucial role in supply chain continuity. The decisions based on predictive analysis around sourcing can significantly prevent supply chain disruptions by making it more resilient to demand variations.
Harnessing technology for agile strategic sourcing
Among other factors, technology is a key enabler for resilience by enhancing flexibility, visibility and in turn agility. Considering the uncertain nature of the business environment, resilience and its enablers need to be embedded in the sourcing strategy through the adoption of a proactive and sustainable approach.
Digital procurement allows the automation of repetitive tasks that boosts efficiency and optimises costs. It offers real-time data and analytics to stakeholders globally using AI and other online tools which are user friendly. As a result, smarter and smooth ways are used to manage data for day-to-day operations and decision making.
Agile Strategic Sourcing enhances collaboration among various departments and allows exploring best practices for sourcing decisions that consider ethics, logistics, and financial aspects. Supply chain solutions enable streamlining data processing across and within organisations and enhance workflow, operations productivity and sustainability from sourcing to shipping.
According to the same Equinix survey around 72 per cent of global businesses are planning ambitious expansions into new markets, backed by major investments in digital technologies. To make the supply chain agile and resilient, businesses must continue to enhance critical supply chain planning capabilities by harnessing the potential of advanced digital technologies such as AI-driven tools, predictive analytics and blockchain technologies. Within the supply chain, procurement relies on greater automation, artificial intelligence, and big data utilisation to go beyond the tactical focus on operations and cost reduction to overall value creation. With the rise of automation, procurement professionals are required to focus on the efficiency, accessibility, and sustainability of purchasing decisions. Organisations can use advanced technologies to map the existing processes and make them integrated and transparent. This helps them become far more responsive to major disruptions and variability. Businesses can embed efficiency in operations and reinvent traditional processes by implementing the right technologies for strategic sourcing.
Although governments in many cases are learning from the private sector about the transformation of digital procurement and technological trends, other governments lead the change and initiate the transformation. In the Middle East, Gulf Cooperation Council (GCC) governments have also sought to improve the overall business environment to enable a more robust landscape. For example, the United Arab Emirates (UAE) government is constantly undertaking several strategies to align with the evolving industry needs. Accelerating the digital transformation of the government procurement process, the Ministry of Finance in UAE has developed a comprehensive system that digitalises the procurement process across UAE federal entities by bringing together federal entities and registered suppliers on a single platform. The Digital procurement platform enables the automation of procurement processes, including announcement, bidding and following up on tenders, placing purchase orders, and digital invoicing. The program encourages the use of technology such as RFID, GPS, and blockchain to improve traceability and transparency in the supply chain.
An agile approach to sourcing can reduce project timelines and boost the quality of the sourcing contract. The flexibility, adaptability, and enhanced sourcing experience of buyers are enablers for a faster approach to suppliers’ selections and contracting process. Nevertheless, not all companies have the readiness for following this approach. A proper evaluation should be conducted to understand and address the feasibility of the implementation of an agile sourcing strategy. A balanced approach between traditional and agile sourcing strategies could be considered.
Reliance on a diverse pool of suppliers
Different phases of strategic sourcing such as planning and strategy, supplier search and selection, contract, and supplier relationship, could play a crucial role in avoiding any probable future disruptions. It also focuses on choosing a reliable supplier base for organisations. They are not only evaluated on costs but on various parameters such as quality, collaboration, responsiveness, and delivery amongst other capabilities. Since supplier management directly impacts the supply chain profitability, procurement leaders often deal with supplier diversity pressures. HSBC Holdings Plc survey evealed that more than 40 per cent of decision-makers recognise the need to revamp their supply chains in 2023. Another survey executed by Gartner Inc. in the first quarter of 2022 revealed that 74 per cent of supply chain leaders made changes to the size and number of locations in their supply chain network. To deal with operational challenges amid any disruptions, supply chain leaders must engage with a diverse pool of suppliers, alternate, transport and logistics providers and explore alternate trading partnerships. Businesses can diversify the supply chain by multi-sourcing and can build greater agility and resilience into their supply chains. Diversification can also help organisations build more strategic relationships with suppliers and provide benefits in several areas, from cost savings to workforce management.
Managing workforce strategically
The integration of technology has fundamentally changed the way supply chains operate globally. Consumers are becoming more demanding, and this is leading supply chains to continuously evolve and engage with a workforce equipped with the right talent, skills, and experience. Since modern operations are focused on technological integration, the existing and future workforce in the supply chain is required to be equipped with traditional skills along with innovative technical expertise. The demand for skilled labourhas increased in recent years and the shortage of qualified workers has a significant impact on the value chain. The lack of skilled workers also causes delays and disruptions in the supply chain. Addressing these issues, strategic sourcing can deliver optimal value to businesses by achieving improved procurement efficiencies, regulating labour costs and sourcing suitable talent.
Higher education institutes and academics can significantly contribute by providing advanced courses and inculcating innovative skills required in the industry. Academics along with sector leaders can facilitate partnerships with organisations and industry bodies to establish a regular dialogue through workshops and mentorship sessions with aspiring students and the existing workforce to prepare them for future disruptions and strategically manage business operations.