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The pandemic-related supply chain interruptions that started in 2020 and gathered steam in 2021 are making life difficult for buyers across most product categories right now. From semiconductors and electronics components to resin and plastics, many of the fundamental products that buyers need for their companies’ products are difficult to get and/or more expensive than usual right now.
“As the global economic recovery continues to gather steam, what is increasingly apparent is how it will be stymied by supply chain disruptions that are now showing up at every corner,” Moody’s Analytics’ Tim Uy was quoted as saying on CNBC. And the situation may worsen before it gets any better.
“Border controls and mobility restrictions, unavailability of a global vaccine pass and pent-up demand from being stuck at home have combined for a perfect storm where global production will be hampered because deliveries are not made in time, costs and prices will rise, and GDP growth worldwide will not be as robust as a result,” Uy continued. “Supply will likely play catch up for some time, particularly as there are bottlenecks in every link of the supply chain.”
Ongoing Volatility and Increasing Complexity
To learn how buyers are coping with and reacting to the current supply chain disruptions, Keelvar asked a group of sourcing professionals to share their experiences and predictions during the ongoing volatility and increasing procurement complexity. In its 2021 Voices of Sourcing Report: Sourcing in Flux Amidst Current & Future Challenges, Keelvar says that:
- Managing disruption is more important than ever—but sourcing teams may struggle to meet the C-suite’s rising expectations while juggling volatility. Given the rising frequency of supply chain shocks in 2020 and 2021, Keelvar says it’s “of little surprise” that managing disruption came out on top as the most important focus area for two-thirds (67%) of respondents. Very few respondents indicated they were not affected in this area. Nearly half (49%) also felt it was very important for them to concurrently focus on the increasing expectations for sourcing coming top-down from the C-suite.
- Supplier speed and reliability are top decision criteria, but emerging priorities will gain more attention over the next five years. Disruptions had a knock-on effect on other areas of sourcing, Keelvar reports, with 41% of respondents saying that it’s very important to focus on modernizing their technology solutions and 36% finding it critical to manage competition to secure quality suppliers. “And while the weighing of non-price bid criteria didn’t rank as high in utmost importance (perhaps due to the urgent firefighting taking place), it actually ranked runner-up in terms of overall importance,” the company states in its report. “This suggests that as disruptions abate, non-price factors will be a top ongoing focus area.”
- Sustainability strategies will have a greater future impact on sourcing, but challenges for implementation remain. Keelvar’s report found that despite the critical importance of having sustainable and environmentally-friendly practices, monitoring the performance and outcomes of these efforts and implementing supplier diversity programs played less on the minds of the respondents (26% and 5% respectively) than more immediate business needs.
- Challenges and stressors translate into where professionals allocate more mental energy. Keelvar asked respondents to reveal “what keeps them up at night.” Sourcing teams’ ability to react to disruptions that may come with fluctuating supply and capacity constraints both ranked slightly below (56%) their concerns for meeting cost and reliability targets (59%), which topped the list of workplace pressures. Supplier speed and reliability are top decision criteria, it adds, but emerging priorities will gain more attention in the next five years.
- Despite the prevalence of job losses in many sectors, more sourcing teams have seen their human resources grow or remain static than those who experienced workforce decline. “Our findings suggest there has been some degree of recognition that business objectives and continuity—especially amidst significant disruptions—are less likely to be achieved without a robust sourcing team at hand,” Keelvar states, adding that respondents reported significant growth (17%) or slight growth (18%) in the size of their sourcing functions in the last 12 months.
- Technology for e-sourcing, optimization and automation adoption still has much room for growth to have a bigger impact and to help teams manage complexity. Modernizing sourcing technology may have been pushed near the top of the business agenda for 40% of respondents, but Keelvar’s data suggests that when it comes to using e-sourcing solutions, professionals still have some way to go. Its survey found that one in three sourcing professionals use such technology for a small percentage of RFPs (around 10%), while 23% of buyers rely mostly on manual processes or spreadsheets to do their work.
Setting Ambitious Goals
With procurement’s value and contribution being indispensable to organizations with supply chains, Keelvar says that the scope of work and responsibilities of professionals who manage sourcing functions has expanded to meet new complexities. “The main focus for sourcing teams [right now] is on firefighting disruptions and managing immediate business risk,” it adds, “but [other] priorities including sustainability will be the next frontier for procurement, and the C-suite is already setting ambitious goals.”
