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Managing supply chain and procurement through disruption

Six strategies from supply chain and procurement leaders to navigate volatility and inflation

  • Michael Ciatto

    Supply Chain Service Line CEO Genpact

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  • Stephen Simko

    Global Source to Pay Service Line Leader

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Published

11/16/2022

The past couple of years have challenged supply chain and sourcing professionals on multiple fronts. They grappled with unprecedented supply disruptions on the one hand and unpredictable demand on the other. And then came the third whammy of macroeconomic disruption in the form of unprecedented inflation and a looming recession.

Facing these dynamics, how are leading businesses future-proofing their supply chain and procurement to withstand current and future shocks? How are they protecting their customers from volatility?

Genpact recently hosted an exclusive roundtable with supply chain and procurement leaders from industries spanning manufacturing, consumer goods, semiconductors, software, and social media. This diverse group of professionals from across the world listed many common problems – and solutions – as their top priorities as they steer their businesses through stormy seas. These are our key takeaways from the discussions.

Local sourcing = Stronger supply chains

Our guest speaker, Jeff Cox, chief operating officer at GE Lighting, a Savant Company, identified the scarcity and rising cost of components – specifically semiconductor chips – as a key challenge for his business. He described how his team is mitigating this risk by diversifying supply geographically – often introducing more "local" options – and building stronger, more integrated partnerships with key vendors. As another leader put it, the goal has shifted from optimizing for the lowest cost supply to identifying the shortest supply chain and added redundancies.

Good data + Trusted customer relationships = Accurate demand forecasting

Many industries saw demand skyrocket during the early days of the pandemic only to have it rationalize nearly as quickly later. For others – like the semiconductor industry – demand continues to outstrip supply. As unabated inflation and economic uncertainty add more complexity and unpredictability, businesses are using data and technologies such as AI and machine learning to sense changes and forecast demand more accurately. Additionally, "building trust with our channel partners so that we have a sense of their inventories and market demand has also helped us stay ahead of demand," said one of the participants. The group also listed good master data management as a critical element of gaining visibility. Leading solutions have focused on the strong integration of data and process outside of the companies' four walls in an effort to connect the extended value chain. And as Jeff reminded the group, reducing complexity by optimizing the number of product lines and variants a company sells can also help businesses focus on meeting their customers' needs better.

Better predictive analytics = Improved inflation management

Enterprises are using different strategies to adapt to record inflation. Though some are integrating backward – buying suppliers to control costs – others are working on controlling transportation and logistics costs by using data analytics to optimize shipping and storage. Industry approaches to managing increased costs also differ. Though those in the consumer goods industry were able to pass costs on to customers, many others were absorbing them, taking body blows to their business. The ability to manage margin through cost monitoring and price elasticity modeling proved a leading theme. Everyone agreed that making data work for them was pivotal to predicting and managing inflation.

Automation – Cumbersome work = An ability to retain talent

The pandemic hit supply chain organizations hard, prompting many to quit the industry. In addition, competition for logistics workers (particularly in warehouses) from online retailers drove up compensation. Businesses are now looking to attract and retain key talent by using automation to cut back on nonessential tasks and new investments in technology to improve the employee experience and quality of life and work. A key recognition among participants was that Generation Z is the digital generation and, consequently, technology investment and a culture of continuous innovation are critical to attracting and retaining top talent in a tight labor market.

People-centric technology x Empathy = More cross-functional collaboration

Businesses understand that to stay agile and profitable in today's environment, they must connect people and data across the organization and beyond. This involves transforming ways of working and collaborating with technology and insights. But technology has proved a double-edged sword during the pandemic. "We found ourselves fighting collaboration fatigue from back-to-back virtual meetings. We then took a step back and incorporated mental health breaks into our schedules," a participant said.

What's better for the planet = What's better for business

Once an area that most companies merely paid lip service to, sustainability has moved to the forefront of efforts to build resilient supply chains. "The conversation around sustainability in Europe is years ahead of the US. And it's become even more important with an energy crisis just around the corner," commented one leader. Committing to responsible sourcing, green energy, streamlined transportation, refurbishing equipment, and promoting a circular economy are different ways in which enterprises are doing their part to safeguard the planet and reduce future uncertainty.

Even as organizations take different paths to creating robust supply chains, one common theme that emerges is the primacy of good data in delivering the transparency and visibility supply chain and procurement leaders need to stay one step ahead of change. When data has secured visibility and enabled effective collaboration, applying predictive and then prescriptive analytics can follow. The companies that digitally connect their supply ecosystems will become the ones that ride out the next wave of disruption.