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10 tips for reviewing your procurement strategy

In recent years, traditional supply chains have been disrupted by extraordinary and unpredictable changes. Reliance on the just-in-time strategy exposes companies to risks that can jeopardize business continuity through shortages and service level disruptions. How can you build resilience and regain harmony in this vast logistics puzzle?

First of all, the famous just-in-time supply model requires some thought. “We may be moving from the just-in-time era to just-in-case era,” says Louis J. Duhamel, a strategic advisor at Deloitte.

The benefits of predictability

Organizations have a vested interest in rethinking their inventory management. “If you’re going to pay a lot of money for products from far away, it may be better in the short term to stock more. Then, at the same time, find a more regional supplier, even if it means helping them upgrade.”

While ordering in larger quantities to stockpile is more expensive upstream, you could achieve better margins through greater predictability in the medium and long term.

The power of automation

With the current labour shortage dragging on, automation and digital transformation also factor into the equation. The days when robots and the digital arsenal were perceived as “job thieves” are long gone.

Transforming practices and tackling the challenges of Industry 3.0 (process automation, modernization and digitization) are a must, even if they require time, investment and a clear strategic plan. You also need to be able to weather unexpected storms—health crises, effects of war, inflation, oil prices, weather events, demographic impact on the workforce or even container shortages.

The good news, according to Louis J. Duhamel, “is that manufacturers are naturally resilient and already equipped with solid tools.”

The benefits of transparency

Transparency is a crucial component in preventing supply chain derailments. “Don’t hide anything. If you anticipate a delay, it’s best to talk about it right away, and explain the reasons.”

One suggestion for companies is to accept to absorb some costs in order to better manage risk, sleep at night and avoid losing a big client due to repeated delays.

10 miscellaneous tips

  1. Reconsider the just-in-time model
  2. Find more “local” suppliers, on a continental scale
  3. Help suppliers get up to speed
  4. Assess the possibility of producing certain components yourself
  5. Increase the inventory and volume of items (perishable or not) stored
  6. Get substantial property and casualty insurance
  7. Invest in automation (robotization and digital operational core)
  8. Secure payment methods (currency risk, Incoterms, etc.)
  9. Reduce risks that impact certain margins
  10. Explore government grants and assistance

Moving from thought to action

For this transition to be optimal, teams need to be mobilized, and you need the support of specialists who can plot out the steps and guide the execution of strategic action plans.

These steps are all the more critical because they require many organizations to rethink their cash flow. If the just-in-time model favours short turnaround times between raw material or component order cycles and transaction cycles, the current reality is prone to destabilize cash flow.

With a global network of experts, we help organizations develop and implement solutions for new market development.

To learn more about these challenges and, their impacts and business opportunities, please watch a 90-minute webinar entitled Repenser sa chaîne d’approvisionnement : des solutions aux enjeux actuels et futurs (in French only). Offered free by Desjardins, this discussion brings together panelists on a very important topic.