As 2021 closed and the world is still processing COVID-19’s devastating impact, procurement professionals continue to navigate murky waters. Amid setbacks, new virus variants, supply chain disruptions, and a continuously stuck transportation industry, procurement professionals need to be one step ahead to mitigate current and future disruptions and protect the supply chain while driving value for their organizations.
Even before the pandemic, procurement professionals were facing changes. The technological advancements of the 21st century have created incredible efficiencies for nearly every industry when those technologies are used. More efforts toward a sustainable future are being demanded by both consumers and executives looking to save on costs.
To that end, this blog focuses on the following emerging trends in procurement and supply chain management for 2022:
Risk mitigation to better prepare for sudden changes from disruptions and consumer demands
Digitization to find efficiencies that impact the bottom line
Transportation and freight optimization to curb costs from setbacks and meet the rising demands
Sustainability to adapt to a changing set of demands from consumers and to save on long-term costs
1. Risk Mitigation
The COVID-19 pandemic exposed many existing challenges across business operations, pushing organizations across the globe to adapt quickly and dramatically to shifts in supply and demand as well as supply chain disruptions.
Practicing risk mitigation and supply chain optimization is no longer just a way to save on costs; it’s now a necessity. Businesses need plans to prepare for rapid, significant shifts such as those during the first year of the pandemic, some of which were so significant that global trade patterns changed. Although major disasters are rare, their impact will affect more people in the future due to globalization. A natural disaster in Vietnam, for example, could have a ripple effect that starts with the supplier and ends with the retailer and customer in the US.
On top of this, supply chain inefficiencies will reveal themselves even further when major disruptions happen. If you’re left scrambling for a solution, your competitors will be outpacing you.
Understanding How to Manage Risk
It’s essential to look under every rock, and it’s equally important to optimize your supply chain in the right ways. Over-optimizing can be just as costly as allowing disruptions to happen.
Stockpiling inventory for potential catastrophes is important. However, if that catastrophe never happens, you have burned through your budget with transportation, product, and warehouse costs. On the other hand, you can miss out on opportunities to increase your revenue by not anticipating customer behaviors, such as panic buying, with a lower inventory.
The solution? Assess the risks properly and leverage your experience to make informed decisions that positively impact your supply chain management. You will also want to do the following:
Perform audits on your processes and supply chain to identify social, environmental, and political weaknesses by conducting stress tests on suppliers to see how relationships, pricing, logistics, and production hold up under strain.
Build a supply chain emergency plan that is up to date and allows you to fall back if a link in the supply chain is significantly impacted.
Increase your supply chain agility by diversifying your suppliers to not depend on a single source.
Risk mitigation and supply chain optimization are no longer just nice to have; they are necessary for the growth and survival of organizations.
The acceleration toward digitization has been the major theme of the 21st century. Across all industries, digital technologies are necessary to be at the core of the “next" normal. Equipping your organization with digital technologies will better meet your customers' needs. It will also improve your operation's agility and responsiveness without increasing costs.
Blockchain is an important piece of digital technology to follow during 2022. Although Gartner predicts that 80% of supply chain blockchain initiatives will remain at the pilot stage in 2022, the proven success of this digital technology in banking and insurance provides a hopeful outlook when it comes to improving supply chain transparency, protecting sensitive information, reducing disruptions, and delivering more reliable service to the end-user.
3. Transportation and Freight Optimization
Before the pandemic, most consumers likely didn’t know much about the global supply chain, but with the ongoing disruptions, more people know about specific links, such as the fact that products cannot get to shelves without millions of truck drivers.
The transportation and freight industry is projected to witness extensive growth over the next decade.
In preparation for this freight demand, companies can begin adopting efficiencies such as automated technologies in warehouses and distribution centers. This provides better freight data at ports that will help companies better utilize their pre-existing freight capacity and streamline the number of trips needed, ultimately reducing the amount of energy used, carbon emissions, and costs.
The advent of sustainable energy is here, and the proof is in customer demands. According to a survey conducted by Accenture, consumers are primarily focused on quality and price, but 83% believe that it is either important or extremely important for companies to design products that can be reused or recycled. From the same study:
72% are buying more environmentally friendly products than they were five years prior to the study.
81% expect that they will buy more environmentally friendly products in the future.
More than 50% are willing to pay more money for environmentally friendly products.
This means procurement professionals need to focus not just on the bottom line but also on customers’ changing demands.
Adapting to Emerging Trends in Procurement and Supply Chain Management with SRM
The future is changing rapidly in terms of digital technologies, sustainability trends, consumer demands, and more. Keeping up with everything to ensure you adapt while saving on the bottom line is challenging unless you partner with a team of experienced procurement consultants. At SRM, we go the extra mile, beyond vendor contract negotiations, to offer creative solutions to new challenges in our ever-changing world.
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