Tips for building supply chain resilience through procurement
When it comes to procurement and project fulfilment, there are currently a lot of challenges to navigate when it comes to supply chains. Whether it’s geopolitical factors, changing global trade agreements or evolving tariffs, inflation or even climate change, supply chains can be vulnerable. In both public and private sector organisations, procurement can play a vital role in managing uncertainty and making supply chains more resilient.
In this article, we explore why supply chain resilience matters and how effective procurement can incorporate strategies to enhance resilience and deliver better outcomes.
Jump to:
- What is supply chain resilience?
- Why is supply chain resilience important?
- What is the role of procurement in strengthening supply chains?
- What does the Procurement Act 2023 mean for procurement supply chains?
- Tips for procurement buyers on building more resilient supply chains
- How we can help with procurement resilience
What is supply chain resilience?
Supply chain resilience refers to how well a supply chain can anticipate, prepare for and respond to things that can cause disruption and delays. Supply chain resilience isn’t about avoiding disruption completely (as that won’t always be realistically possible) but instead is focused on mitigating the potential risks, reducing the time it takes to recover from problems and maintaining as much operational continuity as possible in the meantime.
Why is supply chain resilience important?
Global events of recent years have highlighted the fragility in some supply chains and the problems it can cause. Whether it’s Brexit, shipping disruptions, wars, trade tariffs, or a global pandemic, these events have demonstrated that organisations depending on complex or narrow supply chains can encounter significant problems. These issues could include:
- Operational standstill, if projects are delayed or unable to be completed due to supply chain disruption
- Reputational damage, by being unable to deliver projects to deadline and the standards expected
- Financial losses, due to having to source supplies/suppliers elsewhere or paying a premium for a priority service/goods.
The other side of the coin is that having a resilient supply chain can give organisations a competitive edge, meaning that you are better placed to respond to market shifts, customer demand and regulatory changes.
What is the role of procurement in strengthening supply chains?
Procurement is essentially the strategy that sits between the buying organisation and its suppliers, so has a big role to play in helping make sure the supply chain is set up for success.
Some of the areas include:
- Supplier diversification: Embedding KPIs within our frameworks to reduce reliance on single-source suppliers by enabling and encouraging a diverse supply chain, including SMEs and micro businesses
- Risk Assessment and Management: Identifying potential supply chain risks implementing mitigation plans.
- Strategic Sourcing: Prioritising long-term value, quality, and risk management over short-term cost savings.
- Contractual Safeguards: Embedding resilience clauses such as contingency planning and KPIs into contracts.
- Supplier Relationship Management (SRM): Developing strong, collaborative supplier relationships to improve information flow and flexibility.
- Data and Analytics: Using spend and supplier data to forecast disruptions, set the right KPIs to evaluate performance, and make informed decisions when awarding and managing contracts.
What does the Procurement Act 2023 mean for procurement supply chains?
The recent legislation changes are far-reaching and specifically in relation to supply chain resilience, there several elements that come into play for transforming public procurement.
- Greater transparency throughout the supply chain: The new requirements for open contracting and data sharing promote visibility across the supply chain, which can benefit all parties involved.
- Focus on value for money: This encourages a shift from always awarding contracts based on the lowest price, to an evaluation process that takes into account overall value, including innovation, resilience and sustainability.
- Innovation and flexibility: The new regulations make it easier for innovative SMEs to successfully bid for projects, enhancing supply diversity.
- Mandatory notices and pipelines: The advance notice of procurements helps suppliers to prepare for the bidding process and ensure their own supply chains are solid, while buyers can more effectively manage continuity.
- Strengthened supplier exclusion grounds: This allows the removal of unethical or high-risk suppliers from the chain, helping reduce any issues caused by this and strengthening the supply chain as a result.
Download our Essential Guide to the Procurement Act to find out more.
Tips for procurement buyers on building more resilient supply chains
Some practical steps that procurement teams can take to improve their supply chain resilience include:
- Conducting a supply chain risk assessment: Map the proposed or current supply chain to understand where there may be vulnerabilities, so these can be mitigated.
- Developing a supplier diversification strategy: Avoid single-source dependencies and explore more SME suppliers to increase competition and innovation as well as diversity.
- Strengthening contracts: Include terms that address risk-sharing, contingency planning, and crisis response so help cover any identified areas of vulnerability.
- Investing in supplier relationships: Regularly engage with suppliers, be transparent, and support their own resilience planning.
- Using data to drive procurement decisions: Ensure your tracking and reporting provides the right level of visibility into supplier performance, risks, and opportunities.
- Utilising the right tools: Ensure procurement teams are equipped with the right tools to manage complexity (such as sourcing specialist contractors), and have access to the best procurement solutions to efficiently manage the end-to-end process.
- Embracing ESG and ethical sourcing: Responsible procurement supports long-term supply chain viability and reduces reputational risks.
How we can help with procurement resilience
Making changes to supply chains can be a complex and challenging process, but current and future procurement calls for the focus to change from purely cost-driven, to a more social value-driven approach, while also mitigating external risks.
At Procurement Hub, we have extensive experience in helping organisations to overcome their procurement and supply chain challenges, with our solutions and consultancy services meaning that you can get the level of support needed to maximise outcomes and look towards a more efficient and exciting procurement future.
You can sign up for free to gain access to our current solutions and enquire about expert support for developing a more robust supply chain, or any other part of your procurement strategy.