May 2021

As a professional in the logistics industry, you likely already know that even the best-laid plans often go awry due to forces well beyond your control. However, something that you can control is your response to these issues. In fact, it's generally recommended that you not only have your initial plans, but also a host of contingencies to which you can pivot if (or, more often, when) something doesn't go as you'd expected.

Especially in recent months, you have no doubt experienced supply chain holdups that would have been largely unforeseeable before the pandemic hit, and therefore quickly learned this valuable lesson, according to Vending Market Watch. The good news is that during this time, everyone was on the same page: Many of the supply chain problems being encountered were universal.

Don't let your supply chain efforts be derailed by substandard planning.Don't let your supply chain efforts be derailed by substandard planning.

But what about after the pandemic is reduced to a low-level threat and, eventually, a memory? Even now, supply is "extremely tight" in many corners of the global supply chain, the report said. As such, you likely need to continue looking at and refining your backup plans for some time to come, because while many parts of the world are in recovery mode, there are others — such as India — where it's still very much a problem that can delay manufacturing and shipment times by longer stretches than normal. 

Seeing it from both sides
Often, if you are toward the tail end of a given supply chain, you may not think much about the problems your suppliers or even initial manufacturers are facing, but many of the same freight headaches reverberate up and down this ecosystem, according to the Sourcing Journal. If a manufacturer has too much product on hand because of shipping problems, but your preferred shippers are plagued by issues beyond their control, then this isn't necessarily something you could have avoided.

However, that means you may have to find more efficient ways of getting what you need (including shifting to different suppliers or shippers as required), the report said. For manufacturers, it's also possible to improve forecasting with more efficient production processes that reduce lag times and create something more akin to an "on-demand" model.

Coming together for supply chain planning
With all of the above in mind, it's clear that companies would do well to make sure they are collaborating closely with their various partners up and down the supply chain, according to Supply & Demand Chain Executive. Volatility is something of a given in the logistics industry, but if your company and all the companies depending on it for any aspect of procurement or shipping can do more to get on the same page, the risk that you will run into difficulties on this front are at least somewhat reduced.

Indeed, the more you can do to build out a variety of contingency plans, and then possibly some contingencies for those contingencies, the better off your logistics efforts will be moving forward. The realities of the industry were brought into sharp relief by the ups and downs of the pandemic, and now is the time to address some of the shortcomings you have experienced in recent months.


Call it an example of the butterfly effect in action: The medical supply chain — both in the U.S. and around the world — is moving at a snail's pace. In some respects, this is due to a lack of one simple piece of equipment. Plastic pipette tips are typically used in everything from medical research to COVID-19 testing and blood tests, but they've started to come into short supply in recent weeks, hobbling the industry.

Like many other aspects of the supply chain since the start of the pandemic, a series of unfortunate problems came together to create a situation in which these once-ubiquitous pipettes are now frustratingly difficult to come by, according to STAT. First and foremost is increased demand, as they are often used in COVID testing and, of course, the world has had great need of that medical service for well over a year. The U.S. alone goes through millions per week.

Pipette tips are in short supply these days.Pipette tips are in short supply these days.

In addition, the power outages resulting from winter storms in Texas caused a number of major manufacturers to stop churning out the raw materials used in pipette tips, the report said. Soon after, a fire at a company that produces packaging for these tips throttled capacity even more. Altogether, these events stifled production at a time when they were in greatest demand, leaving many medical facilities to face critical shortages.The pent-up demand may take months or more of increased output to start unwinding, let alone recover from.

What's the problem?
Even when talking about just the medical-research and testing side of the problem with these delays, there are two problems that immediately spin out of the shortage, according to a separate STAT report. First is the work of countless researchers and critical testing may have to be halted when supplies run out, which could derail critical work.

Second is that even when organizations do place new orders for shipments of pipette tips, there's little to no clarity from suppliers or manufacturers about what happens next, the report said. For instance, companies may not know how much of their orders they will receive, if any, or how suppliers decide which orders to prioritize when sending shipments. That level of unpredictability creates additional problems beyond the shortages themselves.

Relief in the future?
The good news is that this is a universally recognized problem and more is already being done to improve supply, according to the Augusta Free Press. A company called Grenova — based in Richmond, Virginia — manufactures devices that sterilize previously used pipette tips so they can be reused, and the firm is moving to a new, larger facility in the near future. Since COVID began, the company has grown four-fold in size and needs to be able to meet increased demand. It's believed the company will be able to add 250 more jobs over the next three years as a result.

Obviously, this is an issue that companies in the medical supply chain will have to monitor closely in the months to come. Since there's no end in sight for the shortage, companies must do all they can to solidify their supply chains.


The concept of sustainability can take a number of forms when it comes to procurement processes, both for individual companies and the entire logistics industry. But for the world at large, sustainability often boils down to a different kind of trend: going green. That is certainly a concern for logistics and procurement as well, and in recent weeks, a number of household-name companies are urging the U.S. to do more on this front.

Several big businesses, including Google, Hewlett Packard, Adobe and FirstLight Power, got together with nonprofits like the Center for Climate and Energy Solutions, the Information Technology and Innovation Foundation and the U.S. Energy Storage Association to co-write a letter to President Joe Biden highlighting their concerns about sustainability in the supply chain. In it, the organizations highlighted a recent executive order that aims to get the entire federal supply chain to zero-emissions no later than 2035, and pushed for a more aggressive approach.

"We, as companies and organizations committed to the clean energy transition, believe that the federal government can accelerate the creation of a carbon-free electricity sector by adopting strong targets for federal facilities to procure around-the-clock clean energy," they wrote. In addition, they outlined a number of steps the federal government could take to get to that point, including interim targets for federal departments and phased-in implementation of green tech and processes.

More supply chains are slated to go green in the next several years and beyond.More supply chains are slated to go green in the next several years and beyond.

Steps in the right direction?
Around the same time, the Biden administration unveiled some parts of its proposed federal budget for 2022, and many of the issues being pushed for by those organizations are involved, at least in part, in those plans, according to Government Executive. That includes investing $600 million to support development and ramping up American manufacturing capacity to produce more fully electric vehicles that would be purchased by 18 federal agencies.

Currently, there are no more specific guidelines related to the executive order about "greening" the American supply chain and procurement processes, the report said. However, it's possible these were left out of the initial outline for the budget proposal, but will be included when the complete document is released later this year.

A different approach
Meanwhile, some federal legislators are not content to wait for the slower rollout of these processes, and are pushing for more clean-energy initiatives via bills now being introduced to the U.S. Senate. Indeed, Sens. Elizabeth Warren of Massachusetts and Andy Levin of Michigan recently introduced legislation that would "create a $1.5 trillion federal procurement commitment over the next 10 years to purchase American-made clean, renewable, and emission-free energy products for federal, state, and local use, and for export," according to a report from Warren's office.

This includes creating a grant program related to green procurement, funding large federal bulk purchases of green products that can then be sold to state and local governments at discounts, creating green infrastructure development jobs and more.

When companies can do more in-house to "go green," they are doing their part to improve the broader ecosystem of their unique supply chain. That, in turn, helps the entire industry reduce emissions one business at a time.


It's not just companies that are facing more difficult times as a result of the supply chain snags and delays seen over the past year. Consumers, too, are finding themselves in a tough situation — not only because they are having problems getting the things they want or need, but also because they're being forced to pay more for those items.

In recent weeks, a number of brand-name companies including Whirlpool, Procter & Gamble and Chipotle Mexican Grill announced that they were anticipating the need to raise prices for customers, according to Supply Chain Brain. The reason? Material costs are on the rise, and they have to pass those price hikes on to consumers to maintain their bottom lines. Indeed, industry research suggests that the vast majority of manufacturers in the U.S. are now paying more than they used to for raw materials.

Prices are on the rise for many consumer products.Prices are on the rise for many consumer products.

The question many may have is whether this is a short-term situation where prices briefly rise, then settle back down again as the national economy returns to normal amid widespread vaccine rollouts, the report said. Certainly that's what the Federal Reserve Board is betting on at present, but while the national picture is solid and getting better all the time, headlines regarding serious outbreaks around the world — notably in India and Canada — may create more long-tail problems for consumers and companies alike.

A confluence of problems
Of course, the reason raw material prices are on the rise has more to do than just the materials themselves, according to Supply Chain Dives. Ports around the world are backed up because of the Suez Canal blockage earlier this year, labor shortages have been reported in many corners of the world, climate events persist all over the globe and so on. While every situation is different, one thing remains clear throughout: The supply chain has not fully adapted to the "new normal" and might not for some time.

At the same time, demand is on the rise, because the economy (in the U.S., at least) is recovering rather quickly, the report said. As such, companies have less inventory and it's moving off store shelves more quickly, creating a vicious cycle of supply-and-demand that leaves everyone wanting.

"We have a faster than expected economic rebound that's left a lot of suppliers and manufacturers with insufficient inventory and capacity to handle the demand pick-up," Erik Gershwind, CEO of MSC Industrial, told the site.

A slight delay
The other issue is that many of the reasons why prices rise may be felt at the source of products, but then not translate into higher prices immediately. That seems to be the case with the international food supply chain, according to a separate Supply Chain Brain report. Food prices are already at the highest level observed since 2014, and could continue to climb for an indeterminate amount of time to come.

With all this in mind, procurement pros need to be highly strategic in planning their operational efforts months in advance, so they always have a contingency plan to which they can pivot if shipments hit a snag or materials costs rise sharply.


The procurement process certainly got complicated in 2020 and those difficulties have stretched into the first few months of 2021. Between the still-ongoing pandemic, delays related to the Suez Canal blockage, difficulties in procuring raw materials or finished products and more, the executives in charge of these efforts have a lot on their plates.

Even a year after it began, companies up and down the supply chain are still dealing with the effects of the novel coronavirus outbreak and are planning their long-term procurement strategies with these issues in mind, according to the latest 2021 CPO Agenda: 10 Key Issues Procurement Needs to Act on Now survey from The Hackett Group. Indeed, while 41% of chief procurement officers surveyed said that they were expecting conditions to return to pre-pandemic norms by the second quarter of the year, 36% felt the adjustment would take even longer.

The right investments will go a long way for your procurement operations.The right investments will go a long way for your procurement operations.

For that reason, the respondents indicated that they were highly prioritizing spend cost reduction, ahead of any other considerations related to business processes, the report said. It ranked one spot ahead of reducing supply chain risk. Also of note: Building more sustainable and diverse supply chains crept into CPOs' top 10 priorities for the first time in the survey's history.

A modern approach
The ability of any logistics business to focus on more than one of their top priorities at the same time was underscored by the difficulties surrounding the pandemic, and that seems to have only accelerated a trend that had been building for some time, according to the Harvard Business Review. This means CPOs have to keep many plates spinning at the same time in terms of behind-the-scenes improvements, all while making sure their shipping and receiving efforts continue to proceed with little to no difficulties.

"Cost management still matters, but progressive procurement organizations have evolved to address nonfinancial aspects as well—priorities like innovation, risk management, resilience, and corporate citizenship," Shashi Mandapaty, chief procurement officer for the corporate tier at Johnson & Johnson, told HBR.

Strategic investments needed
Of course, to accomplish all of the above — and potentially more — it's important for CPOs to carefully examine how they spend money and whether they're maximizing the return on those investments on an ongoing basis, according to Spend Matters. Often, they may have to make the business case for tech-related upgrades to their existing processes, and that isn't always easy. It is, however, necessary when it comes to keeping up with the speed of the industry, especially amid the still-shifting landscape rocked by COVID.

The more you can do to take a top-down view of your procurement needs and what it will take to get you from where you are to where you need to be, the better off your company will be going forward. That starts with clearly defining your goals and aligning all of your procurement operations toward those endpoints.

 


Procurement can hold a variety of roles within an organization. They range from tacticians to trusted strategic advisors. Procurement’s destiny is determined by the construction of the Pillars of Procurement and understanding how to leverage key influencers to shape their organizational role. Throughout this blog series, my team at Corcentric provided insights about harnessing these key influencers. Doing so optimizes the Procurement function and helps Procurement gain a seat at the decision-making table. 

Vision

Maturing your Procurement function starts by determining what role you want to hold and crafting a roadmap to grow into that position. This is where vision comes into play. It is important to understand this will be a journey. The gap between your team’s current state and desired end state determines the length and extent of this journey.

Focus on understanding your organization’s long-term goals before creating your vision. Then align the vision to how your Procurement function can evolve over time and embed itself within the strategic operations of the company. Think through the following questions:

  • What support functions add value to your stakeholders? 
  • Are there processes and procedures requiring modification or development? 
  • Do any gaps exist within Procurement’s toolkit preventing operational efficiency?
  • What critical skills does the team need to develop?
  • What metrics and KPIs are best suited to accurately measure performance?  

Interaction

Becoming a strategic Procurement function requires carefully executed interactions with stakeholders, suppliers, and executive leadership. As my teammate John Sepcie mentions in his blog, “How we interact with other teams and organizations speaks volumes about not only our current reputation within our own organization, but also how we envision our team and role growing in the future.” 

A focus on fostering a positive experience and achieving stakeholder target outcomes is critical in all interactions. A few simple principles help achieve this:

  • Collaborate: take advantage of all opportunities to engage stakeholders and suppliers for input. Make our goal of enabling their success known and that Procurement is here to help achieve their departmental goals. We need to prove their input is valued and will be acted on.
  • Team Mentality: emphasize our purpose is to serve our stakeholder teams in better achieving organizational goals.
  • Reciprocate: acknowledge when a stakeholder or supplier makes a concession and look for opportunities to reciprocate. This builds trust and will lead to more sought-after collaboration.

Perception

As we all know, perception is reality. Stakeholders and suppliers won’t consider us to be strategic, proactive partners if we don’t take a thoughtful approach to how we position ourselves in their eyes. We need to guide this perception if we are to achieve the status we hope to obtain. 

Procurement can focus on three core goals to avoid being confined to a tactical purchasing function:

  • Proactive Planning: initiate the development and execution of strategic purchasing strategies, supplier performance management programs, and market assessment exercises.
  • Cross-Functional Engagements: develop and nurture relationships with stakeholders, understanding each departments goals and the supplier characteristics they value.
  • Gain Executive Influence: establishing visibility at the executive level into Procurement’s positive impact on organizational goals is critical to Procurement reaching a “trusted advisor” status.

Function

Defining and implementing your Procurement team’s function is arguably the most important influencer of them all. Procurement cannot develop a clear vision, lay the groundwork for positive stakeholder interaction, or drive consistent perception without a well-defined function.

In the last article within this series, my teammate Benjamin Duffy outlined the 3 core functions a Procurement department can hold:

  • Clerical: review requisitions and enforce policy and procedure. Very minimal value-adding activities occur within this function type and, as such, we don’t want Procurement to stay in this space.
  • Tactical/Analytical: plan and execute sourcing events, manage supplier subscriptions or contracts renewals. Value provided is largely tactical, and still doesn’t fully utilize Procurement to the fullest extent.
  • Strategic: proactively deploy Procurement strategies to impact organizational bottom line and create value beyond cost savings. Examples include conducting spend analysis and market assessments to develop strategic sourcing strategies or evaluating and managing supply chain risks.

Procurement teams looking to climb the organizational ladder have some work to do to gain their seat at the table. This begins by developing a well-crafted transformation strategy designed around the four key influencers discussed throughout this series. A maturity assessment is a great place to start. If you are unclear about how to get started, reach out to Corcentric for more information.


This May at the ISM World Annual Conference Corcentric’s Jennifer Ulrich will be delivering a more in depth presentation drawing on her own real world experiences about how these influencers can effectively elevate the role of Procurement. 



Supply chain disruptions were a widespread problem throughout the COVID crisis, but it seems that even now, with problems widely winding down, the logistics industry certainly isn't out of the woods yet. That reality became more evident in recent weeks, with some of the biggest companies in the world announcing that they continue to be dogged by difficulties in procurement, delivery and more.

That includes General Electric and 3M, both of which announced that they were seeing strong demand for their offerings but were not able to confidently project when they could follow through on such demand even as COVID difficulties decline nationwide, according to CNBC. In fact, many of these issues came as a result of difficulties in procuring raw materials and other component parts of their products, such as electronics.

Of course, these companies make many products that other major businesses rely on to create their own offerings, and it's expected that their ups and downs — which have led to higher prices — will have an impact on other companies further down the supply chain, the report said. This includes big names such as Boeing and Caterpillar.

Even big companies can run into major supply-chain snags.Even big companies can run into major supply-chain snags.

A closer look
Interestingly, despite the early issues experienced in 2021 to date, 3M said that it is still on track to hit its initial forecasts for full-year earnings and sales growth, and some outside observers think that might actually be erring on the side of caution, according to Reuters. That's due in part to the fact that 3M already beat its first-quarter estimates, and because many of their products relate to cleaning — which is obviously of high importance in the current climate.

However, the company noted in announcing its financial results that the global economic recovery remains in a highly volatile place. Some regions are getting close to being "back to normal" in terms of high vaccination rates and relaxed COVID protocols, while others very much are not, the report said. As such, many of even the largest and best-known businesses in the world are still playing a game of wait-and-see.

Down the line
If some of the biggest companies in the world are still somewhat at the mercy of COVID, it stands to reason that the reverberations of these problems will be felt all the way down to the smallest of businesses, according to Business Insider. Obviously, it's not just the pandemic that's the problem, because businesses are still digging out from the delays caused by severe winter weather in the American South, the Suez Canal blockage, back orders, work stoppages and more. In many cases, just to expedite shipping and ensure their place at the "front of the line," companies are buying products at prices many times what they normally see.

This is obviously not the kind of thing many within the supply chain can plan for directly. However, it does underscore the importance of being able to pivot to new suppliers as needed and always prioritize being nimble during the most trying times for the industry as a whole, or just their particular corner of it.