Bain and Microsoft: Retail's Supply Chain Modification
A new research study into how COVID-19 has transformed consumer goods supply chains reveals that companies worldwide are willing to change tactics to meet demands. The research “It’s Time to Build Resilience into Retail and Consumer Goods Supply Chains” released by examines over 70 companies and how they’re adapting internal strategies.
“When COVID-19 paralysed global supply chains, it also triggered a massive surge in online sales—a double shock that few retailers and consumer goods companies were prepared to handle,” said Mikey Vu, a partner in Bain & Company’s Retail practice and co-author of the report. “Our research revealed that companies with supply networks designed for maximum cost efficiency were unable to respond quickly to these sudden supply shocks and demand spikes. The prize of efficiency came at the cost of resilience.”
Prior to 2020 many senior executives who once viewed their supply chain as a cost centre now see it as a strategic capability, with 90 per cent planning changes to their supply chain networks, and more than 40 per cent expecting to increase their investments with the intention of increasing resilience, agility and output.
Of the 70 companies surveyed 47 per cent expect to receive input from supply chain organisations on most or all strategic decisions pertaining to merchandising, store operations and product strategy, a reported 17 per cent increase over the 12 months prior to March 2020. This prioritisation of supply chain input only goes to highlight the importance of companies coming together to combat the rising demand in the e-commerce industry.
“We are seeing a significant shift in supply chain strategies as our customers adapt to meet the demands caused by COVID-19. While cost reduction and efficiency remain a critical priority, we are seeing supply chain agility rise to the top of the list for executives. This need for agility has prompted an overwhelming consideration for cloud-based architecture,” said Shelley Bransten, CVP Consumer Goods & Retail Industries at Microsoft.
The research also shows that companies are actively looking to prepare for another supply and demand shock - 60 per cent of retailers and consumer goods companies are planning to increase their investments in facilities that can respond to online orders.
While 40 per cent of respondents admitted they did not yet have internal solutions or external partners needed for their goals, tech giants like , and teaming together to create independent, safe and efficient workforces may be the future these companies need to compete in the modern COVID-19 world.
Will Public Procurement Budgets Increase in 2021?
Procurement is more than just a private enterprise. COVID-19 reminded us that sourcing materials is an essential part of the government’s role. Throughout 2022, tiny departments sourced massive amounts of personal protective equipment (PPE), medical supplies, and emergency vaccines and testing kits. Even non-procurement professionals were pulled into the fray, as frantic timelines demanded nothing less.
According to Celeste Frye, co-founder and CEO of Public Works Partners, the crisis brought procurement to the attention of skilled employees who had never considered it. As non-procurement personnel stepped up to help their coworkers, many found that they’d stumbled upon a critical and rewarding job. “Existing public employees have seen the essential nature of the work”, Frye said. “[They’ve] gained some critical skills and possibly [grown] interested in pursuing procurement as a longer-term career”.
Small, Local Suppliers Take Charge
Frye, whose firm helps organisations engage stakeholders and develop long-term procurement strategies, thinks it well worth the effort to open one’s mind to new opportunities. Cooperative contracts, for instance, can help public departments and municipalities save money, time, and effort. By joining together with other towns or cities in the region, public procurement teams aggregate their purchasing power and can drive better deals.
These cooperative contracts have the added benefit of advancing equity. Smaller suppliers that struggle to compete with established firms for government contracts can act as subcontractors, helping big suppliers fulfil bits of the project. Once they get their foot in the door, small, local, and disadvantaged suppliers can then leverage that government relationship to take on additional projects.
Especially as governments start to pay attention to procurement resilience, public procurement departments must expand their requests for proposals (RFPs) to take into account innovative solutions and diverse suppliers. According to Frye, Public Works Partners—a certified female-owned firm—has benefitted from local and state requirements that specify diversity.
Post-Pandemic Funding Swells Procurement Budgets
And the pandemic won’t be the end of it. City governments need to build sustainable energy infrastructure such as solar panels, charging stations, and recycling plants, ensure that masks and medicines are never in short supply, and source new technologies to keep up with cloud and cybersecurity concerns.
Public procurement budgets will likely increase to match demand. As Peter Ware, Partner and Head of Government at Browne Jacobson, explained, “in a non-pandemic world, the [U.K.] government spends on average around £290 billion on outsourced services, goods, and works...anywhere between 10% and 14% of Gross Domestic Product (GDP). Post-pandemic, city procurement will only increase as national governments provide local divisions with emergency funding.
And in truth, government employees might jump at the opportunity. Frye noted that public procurement could give immediate feedback on new programmes: “[Procurement] is where new laws and policies ‘hit the road’ and are implemented”, she said. “Professionals in these fields get the satisfaction of creating real change and seeing quantifiable outcomes of their work”.