Ivalua exclusive: How a smart approach to procurement can alleviate CEO concerns

By Alex Saric, Smart Procurement Expert at Ivalua
A plethora of factors are set to shake the geopolitical foundations of the world in the months to come. Whether it’s Brexit or deteriorating US-China...

A plethora of factors are set to shake the geopolitical foundations of the world in the months to come.

Whether it’s Brexit or deteriorating US-China trade relations, the supply chain landscape is prone to drastic shifts. This uncertainty was reflected in PwC’s annual CEO survey, where – of the 1,378 CEOs interviewed across 91 countries – top concerns included over-regulation (35%), trade conflicts (31%) and geopolitical uncertainty (30%).

Each of these issues threaten the stability of the supply chain, and if the associated risks such as non-compliance fines, materials shortages or dramatic changes to supply routes can’t be mitigated, organisations could face severe and sudden disruption to critical goods and services. However, organisations are not powerless, and taking a smart approach to procurement can mitigate the potential risks across the supply chain and help businesses to navigate the turbulent times ahead.

Stay adaptable to roll with the punches

Given these unstable political and economic circumstances across the globe, it’s no surprise to see that 45% of CEOs are looking to make a change in their supply chain to ensure products and services continue to be delivered effectively. However, considering that supply routes to regulations can shift at the drop of a hat, deciding on exactly how to prepare the supply chain effectively can be a challenge.

Instead of attempting to predict the future, organisations should be taking practical steps to navigate change as and when it appears by building flexibility into the supply chain. By implementing smart procurement technology, organisations can quickly assess supply chain options and risks, ensuring that everything from source to end-user has the means to change with little warning. By taking a digitised approach, organisations can create a single source of the truth across the supply chain, making it easier to manage existing suppliers and assess the impact of sudden changes. This means organisations can adapt to sudden changes like policy changes, regulatory compliance and materials shortages as and when they occur without disrupting the flow of goods and services.


Organisations need to get musing before they moving

As globalisation continues to rise across the supply chain, organisations are shifting their growth strategy to alternative territories. Sometimes, the benefits are clear, as growing manufacturing powers across the globe can provide opportunities for organisations to innovate, save on bill of materials or even source new components. However, in today’s unstable geopolitical climate, going global isn’t always the best option. Organisations will need to weigh the potential benefits against the risk of future tariff changes, rising import costs and changes in the movement of goods, which could have a stronger impact in the long term.

For example, following the increased tariffs on Chinese imports in the U.S., a wide range of firms have been pushed to relocate at the last minute, which is set to cause great disruption for some time. Without visibility into the supply chain, affected companies will have a hard time deciding on the best course of action.

In order to make informed decisions, organisations need to have 360-degree visibility across the entire supplier base, including international prospects. This means pulling information from suppliers, internal stakeholders and third parties to ensure organisations can weigh up their options effectively and accurately. This will help organisations identify a sustainable long-term strategy to sourcing that supports innovation and balances cost with risk. Flexibility will also be a core factor here, allowing organisations to move critical elements of the supply chain with minimal disruption.

Reducing risk from regulatory restraints

In an increasingly regulated world, firms in every sector are facing continual changes in requirements. With more and more compliance measures coming into force, companies need to improve and better-control key functions such as data flow. Whether it’s GDPR or modern slavery, regulations bring with them a process overhaul, and organisations need to know that every company across the supply chain is taking heed. If not, they risk falling foul of fines that can seriously impact the business. For example, earlier this year, e.l.f. cosmetics agreed to pay almost $1 million because suppliers had used third party vendors in North Korea, falling foul of OFAC North Korea Sanctions Regulations.

In order to maintain compliance, organisations must work collaboratively with suppliers to manage compliance, evaluate performance and measure risk effectively. They also must have seamless access to relevant 3rd party data, such as the OFAC list, to validate supplier compliance. Having the ability to collaborate with stakeholders and access 3rd party data in real time through a single platform is vital, especially when dealing with increasingly dispersed supply chains. By allowing for communication and data sharing across a regularly updated cloud platform, organisations can work together with stakeholders across the supply chain so that regulations are met and all parties are aware of what’s required to avoid fines.

Get smart to avoid being on the backfoot

It’s clear that uncertainty and sudden change will be present for some time. As such, taking a smarter approach to procurement has become a must have for organisations looking for flexibility, visibility and greater collaboration throughout the supply chain. This will allow organisations to mitigate risks effectively as and when they appear, reducing the potential damage caused by current and emerging economic, political and regulatory challenges. Without the technology in place to achieve this, organisations risk responding to major changes after the fact, leaving them permanently on the backfoot.


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