How Are You Preparing for 2023’s Business Landscape?

If Procurement can impact everything from customer satisfaction and product & service quality to cash flows and profitability – shouldn’t it be on top of every team’s 2023 training list?

Supply chains are becoming more and more complex, constrained, and daunting by the day. Covid and post-Covid periods have reaped havoc on supply lines. All these have led to costly impacts on businesses and the global economy. As a result, we’ve seen everything from recessionary pressures to significant inflation, layoffs, and the imposition of austerity measures.

Leveraging Critical Skills in 2023

Many business leaders are looking to their supply teams to increase supply reliability and reduce supply costs. Consequently, Procurement professionals have a formidable task, starting with the 2023 fiscal year. Moreover, “Pricing” management remains critical. However, the leverage of other critical skills is required to be successful in today’s business landscape.

Here are Procurement’s some must-have skills to navigate the current global climate in 2023. They all include enhancements of:

Spend Management

The underpinning of effective spend management is the capacity to formulate and execute an Annual Buying Plan. A good buying plan should include the following components.

    • Forecast: A projection of demand for each of the various categories of products and services (referred to as “commodities”)
    • Market Analysis: An assessment of the market for each commodity
    • Approach: The method used for procuring each commodity
    • Resources: The human and other resources required to procure each commodity successfully
    • Historical Spend: A summary of the previous years’ expenses for procuring each commodity

Risk Management:

Provisions must be made to manage the following types of risks:

    • Supply Risk: The possibility of production line shutdown, failure to meet customer requirements, and/or other catastrophes due to the non-availability of certain goods or services at a particular time.
    • Price Risk: The possibility that prices for goods or services could be adjusted to your organization’s disadvantage.
    • Financial Risk: Your organization could possibly lose existing assets, future revenue, or potential income due to a financial or economic event or series of events. This risk category appears to be eminent.
    • Legal Risk: The possibility that your organization could be a party to a lawsuit, particularly in which your organization has a lower-than-average probability of prevailing.
    • Safety Risk: The possibility that a person could be injured or killed or property damaged or destroyed.

Supply Chain Agility and Visibility

Limited visibility can increase the total cost to serve and the total cost of ownership, reduce supply chain performance and increase the loss of value in your supply chain. Visibility of the interaction between the five critical supply chain dimensions is vital to supply chain success. These areas are complex components, and a thorough understanding of their cause-and-effect relationships is critical. The goal here should be the acquisition of visibility as quickly as possible. Why is visibility critical to realizing supply chain agility and adaptability? The underpinning of agility is visibility, which is a critical enabler. According to a Deloitte study, 66% of procurement leaders claim they have no or limited visibility of their supply chains.

Understanding of Customer Requirements

Utilizing a robust External Customer Requirements Matrix facilitates the capture and understanding of the voice of the customer (VOC) and creates a framework for value creation. It also makes a focal point for corporate strategy, tactical and operational planning, and impetus for corporate and departmental missions, visions, and values. A good Customer Requirements Matrix provides valuable inputs and data points for supplier selection criteria and cost reduction opportunities and provides guidance on designing internal processes and departments and allocating limited resources.

Decisions around Supplier Selection

Unfortunately, it is not usually an easy task to select a supplier. The world-class procurement professional must look beyond a supplier’s attractive price and smooth-talking sales staff. Procurement departments must adopt a method of qualifying suppliers—a series of tests to determine whether a supplier will be a good fit for your organization. While no supplier qualification method can guarantee against supplier performance problems, a good qualification method significantly decreases the likelihood of having egg on your face for making a supplier selection gaffe.

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Recommended Reading

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David Millington, M.Sc., QSM, NPDP, CL6σBB, SPP, SPSM3®, CM®
About the Author:

David Millington, M.Sc., QSM, NPDP, CL6σBB, SPP, SPSM3®, CM®