Challenges for Sourcing Strategies-Global Sourcing 2.0
Global Sourcing 2.0: building an effective Sourcing strategy for times of turmoil.
Global Sourcing 2.0 will define the response of Procurement and Sourcing Teams to another year of volatility. Inflationary pressure continues to build and the business need for Environmental and Supply Chain Risk management gains momentum, creating huge challenges for Sourcing and Procurement Teams.
Procurement and Sourcing Team leaders who had hoped that economic conditions in 2023 would make their jobs easier than last year are already disappointed. As the new year began, the volatility and inflation of the previous year showed no signs of abating
Many of the dimensions of change impacting business in 2023 are likely to still be with us in some form at the outturn of the year. Procurement and Sourcing functions are responding to these wide-ranging challenges in an equally wide range of structural changes and ways of working adaptations. Sourcing teams are facing the New Challenge of Global Sourcing 2.0
Macroeconomic conditions straining procurement
Understandably, the aggregate effect of these challenges has overwhelmed many procurement functions. Procurement can play a critical role in solving today’s most pressing business problems, but it cannot do so on its own. Winning now requires an entirely new level of resilience improvement and value creation built through a coordinated enterprise-wide effort. Global Sourcing in 2023 requires Procurement teams to sit at the heart of business in an expanded mission.
-Protecting against Corporate margin erosion
-Deliver on Environmental and Social Risk in Supply Chain
-Build Resilience against the next Black Swan event
Accordingly, success in protecting margins, containing cost escalation, and dynamically capturing opportunities requires an expanded mission for the procurement function. CEOs should consider positioning their procurement leaders at the center of the company’s response to the current context, tasked with a clear mandate to protect margins. CPOs can then mobilize executives for cross-functional impact and escalate investments in the talent and systems required to achieve and sustain outperformance.
Procurement leaders can combat volatility, inflation, and shortages and build resilience by taking ten core actions. The first critical element required is to gain transparency over the pressures and change drivers in their supply chain. Only be creating true visibility can they start to identify the key decisions required to deliver high level objectives. This will require
support from all functions across the business and external partners to support Procurement in developing a more agile approach.
Wide ranging Risk Assessment of Supplier Network
· Suppliers. What vulnerabilities—including financial, fulfilment, reputational, and environmental—do suppliers face?
· Supply. How are events affecting the end-to-end value chain? Which categories may be hard to secure in the foreseeable future?
· Cost. How are suppliers’ costs of goods sold (COGS) trending? Can we quantify the inflation or deflation they face? What do the results mean for our company’s P&L?
· Environmental. How are Key Suppliers measuring their Environmental impact and taking active measurable and visible steps to reduce as part of wider range of commitments
· Social, How is the Supply network mapped Globally against potential Social risks and are key suppliers.
Building New Skill Sets to Deliver an Expanded Mission for Procurement
As Procurement leaders wrestle with the new challenges of Global Sourcing 2.0 the need for a new range of additional skills becomes a critical need for delivery.
As Sourcing and Procurement teams play a more central role in business delivering their expanded contribution. The need to rapidly build skills will become a critical enabler to deliver their New Mission.
· Delivering a visible assessment of high level risk, across the entire supply chain
· Identifying Environmental impacts, particularly Emissions generated within Supply base
· Minimising impact on Key suppliers at potential risk of audit fatigue
· Building working Partnerships
Global Sourcing 2.0 represents a shift in priority and ways of working. From the old Procurement model of expecting Suppliers to make and supply to a forecast and at the cheapest possible price.
To one where there is a more collaborative approach to Sourcing Strategy based on visible shared data, shared Environmental and Social
commitments and strong partnership for growth. A shared vision of the future that can inform the future requirements.
We have long argued that an approach based on strong partnerships is a more successful Sourcing model than the focus on Cost and make to Forecast.
As more companies move to re structure the breadth of the Sourcing team mission within companies core competencies and skill sets need to be created, adopted and utilised.
Sourcing teams will need to rapidly build or bring in the skills required to bring full risk and impact visibility to their supply chain.
ET2C are a leading global sourcing company, with over twenty years’ experience supporting our clients to develop and deliver their sourcing strategies. We have seen a big rise in our clients demands for
-Emissions measurement and management
-Quality and Compliance. Social & ethical Auditing
As many companies move rapidly towards a future defined by Global Sourcing 2.0. Drop us a line to see how we could support you in your challenges
Email us at Contact@et2cint.com.