How Procurement Can Help Improve Organizational Resilience

Defined as the ability to withstand and recover from disruptions, organizational resilience measures just how well an organization can function effectively even as it adapts to unexpected changes. With the global pandemic ranking as one of the most disruptive events any organization has had to face in modern times, organizations that emerged from the “pressure testing” stronger are being credited with having high levels of resilience.

Now, companies across all industries are thinking harder about resilience, running “what-if?” scenarios and figuring out new ways to operate in a more resilient, sustainable manner. As the department that handles goods and services acquisitions for their organizations, procurement can play a key role in these initiatives. From sourcing to negotiating to managing contracts—and all points in between—CPOs and their teams contribute to organizational resilience on a daily basis.

And when procurement aligns with supply chain, the positive results can be amplified even further. “One area where there is a common ground for procurement and inbound supply chains is to drive resiliency in operations and ensure business continuity,” Coupa Software’s Nari Viswanathan writes in “Logistics Viewpoints.” “When products don’t arrive at the right place, the right time and the right quality, both inbound supply chain planners and procurement buyers face unplanned plant shutdowns or upset customers.”

Viswanathan says some of the key requirements for creating more resilient operations include better supplier risk management; regular testing of resiliency (i.e., using scenario planning and digital twins); and improved communication between buyers and suppliers across critical product categories. “Collaborating with suppliers ensures that any disruption is flagged in advance and supply chain resiliency is improved and business continuity is maintained,” he adds.

Navigating a Complex Environment

In the complex semiconductor supply chain environment, WIN SOURCE is one electronics distributor that’s “acutely aware” of how important resiliency is for companies across all industry segments. “In my opinion, procurement plays an important role in achieving an organization’s resiliency goals,” says Freda King, service representative at WIN SOURCE. “I believe procurement can achieve organizational resiliency goals by working to establish multiple suppliers and partnerships and diversifying the supply chain to reduce dependence on a single supplier.”

By taking these steps, procurement can effectively reduce the risk associated with issues such as supply chain disruptions, raw material shortages and price fluctuations. By building relationships with multiple suppliers, organizations can also better respond to unforeseen situations and maintain continuity of production and delivery. Add technology to the equation and procurement’s role in organizational resilience becomes even more profound.

“By employing supply chain management systems, procurement analytics software and supplier performance assessment tools, organizations can better understand supply chain strengths and weaknesses and make decisions based on actual data,” says King. “A data-driven approach can help organizations better respond to market fluctuations and flexibly adjust their sourcing strategies.”

Four Steps to Better Resilience

Here are four steps CPOs and their teams can take to help their companies operate more resiliently and overcome modern supply chain challenges:

1. Diversify the supply chain. “CPOs and their teams should actively build long-term relationships with multiple reliable suppliers to ensure the availability of options,” says King. “This will reduce dependence on a single supplier and mitigate potential risks due to supply disruptions.”
2. Practice proactive supplier management. This is key to ensuring a resilient supply chain. The CPO and his or her team should maintain close communication and collaboration with key suppliers to build a partnership of mutual trust and cooperation. This also leads to faster response times, better problem solving and higher delivery reliability.
3. Continuous market monitoring and forecasting. By continuously monitoring market trends and demand, CPOs and their teams can more accurately predict future supply chain challenges. “Pay close attention to the impact of technological innovation, industry changes and geopolitical factors, and adjust their sourcing strategies accordingly to adapt to market changes,” King suggests.
4. Improved inventory management and demand planning. These are two of the most important stepping stones to better supply chain resilience. Using advanced supply chain technologies and tools, CPOs can ensure reasonable control and visibility of inventory and make appropriate sourcing decisions based on accurate demand forecasts.

“Most importantly, CPOs should continuously learn and stay in touch with industry experts, attend industry conferences and seminars to enhance knowledge and insight into the semiconductor industry,” says King. “This will [help] procurement better address the challenges of the semiconductor industry and provide strategic and innovative procurement solutions to the organization.”