You don’t need to look much further than the “Great Toilet Paper Panic of 2020” to understand just how fragile supply chains are. In the lead-up to the Covid-19 crisis, household essentials disappeared from shelves almost overnight, leaving anyone who hadn’t stockpiled in deep — well, never mind.
What happened exactly? Not a whole lot. Panic increased demand, and supply chains were too brittle to handle it. Warehouses hadn’t kept enough extra supplies in stock, and manufacturers couldn’t keep up with increased orders.
Any business that relied on personal protective equipment (PPE) or cleaning products to operate learned a hard lesson: even the most routine supplies can become difficult to procure if supply chains break down. If and when these supply chain disruptions occur, they stall procurement plans and, in turn, put business operations in jeopardy.
No matter what supplies a business relies on to operate, supply chain disruption is a business continuity risk. Fortunately, intelligent procurement safeguards against that risk by minimizing the likelihood of disruption and planning for the worst-case scenario.
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What is intelligent procurement?
Intelligent procurement is a procurement process or solution that reduces costs and risks in the purchasing process with minimal human oversight.
The development of intelligent procurement has largely been driven by digital transformation in procurement operations. These technology advancements have made it possible to automate tedious, manual tasks in the procurement process, like ordering and sourcing.
On an ordinary day, the greatest benefit of intelligent procurement is that it helps businesses save time and money. Automated strategic sourcing means finance and operations professionals can find the best price on inventory from a wide range of suppliers and vendors with minimal effort, freeing up time for them to focus on more strategic work.
But when something goes wrong — namely, a supply chain breaks down — intelligent procurement stands out with its ability to protect business continuity. The same strategic sourcing engines that identify good deals can also find replacement vendors when items go out of stock so that businesses are never left without the supplies they need to stay open.
Room for error in supply chains is high
There’s a lot of room for error in the supply chain. That’s because the supply chain is a long series, and each activity in the series is subject to risk. Consider a supply chain with 10 stages, with each stage exposed to 10 different risk factors. That’s a total of 100 risk factors in the chain! And, should a disruption occur early in the series, the entire series is affected.
So, what are the stages of the supply chain? Supply chains cover the full cycle, from sourcing supplies to distributing a product. Some key stages in that cycle include:
- Sourcing raw materials
- Storage and warehouse management
- Order fulfillment
Each of these stages is subject to a wide range of risks, including geopolitical tensions, natural disasters, and human error.
Geopolitical tensions might include boycotts or bans that suddenly prevent the sourcing of raw materials from a specific country. Natural disasters are more obvious. Hurricanes, earthquakes, and other crises can destroy warehouses or manufacturing centers in the blink of an eye, effectively bringing the supply chain to a halt.
And then there is human error. A worker might accidentally ship an order to the wrong location, for example. This type of risk has largely been mitigated by the use of robotic process automation (RPA) in supply chain management, but even these technologies are imperfect and capable of making mistakes.
Errors in the efficiency approach
Those are just some of the external factors that put supply chains at risk. Supply chains are also inherently subject to risks of their own design. What do we mean by that? The modern supply chain is designed for efficiency. Every task in the supply chain occurs “just in time” so that businesses can keep their operational costs low, according to HBR.
This efficiency-driven approach to the supply chain doesn’t work when there is a major crisis like Covid-19. Businesses don’t have extra supplies on hand or systems in place to ramp up production, so they can’t adapt to increased demand.
Another issue with the efficiency approach is that it causes production centers to become concentrated. Businesses don’t use multiple manufacturing centers scattered around the globe because that’s inefficient. Their products all come from one place, and if that one place is exposed to risk, the whole operation shuts down.
We saw this during the peak of the Covid-19 crisis when certain geographic areas went into quarantine.
If a business relied on factories and warehouses in China, their operations became subject to mandates from the Chinese government. Operations could only resume when the government said factory and warehouse workers could return to work. For the duration of time these workers were in quarantine, the entire supply chain came to a standstill.
How intelligent procurement mitigates supply chain risk for your business
Intelligent procurement allows you to see risk in your supply chain and create safeguards against that risk.
For starters, intelligent procurement offers a holistic view of your business’s vendors and suppliers so that it’s easy to see where supplies are coming from. This holistic view allows finance and operations professionals to proactively respond in the event of a natural disaster or other crisis. Let’s say there’s a typhoon in China, and you know the bulk of your supplies are coming from an affected region. Rather than waiting to see if this disaster will affect your business, you can prompt intelligent procurement to find alternate vendors and create new orders for your supplies until the issue is resolved.
If your business has already been affected by supply chain disruption, and your usual vendor cannot deliver your supplies in time, intelligent procurement helps you identify new, perhaps lesser-known, vendors that have your supplies in stock. During the Great Toilet Paper Panic of 2020, a lot of businesses turned to Negotiatus for this reason. Our intelligent procurement platform was able to connect users to thousands of new vendors, many of which won’t appear in a Google search, when their routine orders went out of stock.
Intelligent procurement platforms also keep track of all deliveries, so you can see where there may be delays on important orders. Delivery tracking and alerts allow you to get ahead of delivery delays and reorder the supplies you need from another vendor if you expect there will be a problem.
Procure without supply chain risk
Negotiatus’s intelligent procurement solution connects businesses to thousands of vendors, all from one centralized platform. If a product is out of stock, Negotiatus will automatically source that item from another vendor using our strategic sourcing feature to find a vendor that meets your price, delivery, and compliance requirements.
Request a demo to learn how your business can use our procurement platform to guard against supply chain risk.