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A crucial aspect of any organization’s drive to cut costs and increase efficiencies, the procurement department is wrestling with challenges across numerous different fronts right now. At a high level, the ongoing pandemic-related supply constraints are impacting order lead times and making it difficult for companies to get the materials they need to make their own goods.
Rising transportation costs, a truck driver shortage and capacity crunches in some modes are also interfering with what otherwise would be a “business as usual” process for many procurement departments.
That’s not the only thing keeping procurement professionals up at night right now. DocuCollab says procurement departments are also grappling with poor supply chain transparency, the
need for better risk management, inaccurate data and how to maintain better control and visibility over spend. These and other issues can impact a procurement department’s efficiency levels, and for indirect buys (i.e., those services or supplies needed to run the day-to-day business operations).
Real-World Impacts
In just one example of how the interruptions are playing out in the real world right now, WSJ recently highlighted how “Supply-Chain Snarls Hit Production of Trailers Needed to Haul Goods.” It says manufacturers can’t get their hands on materials to make semitrailers, despite high demand from trucking companies.
Wabash National Corp., for example, expects to produce about 25% fewer trailers this year than it did before the pandemic because of shortages of everything from foam insulation to suspension components and taillight wiring, WSJ reports. “The factory backups are driving down U.S. trailer orders,” it states, “as transportation equipment manufacturers put a lid on sales because their production slots are filled deep into 2022.”
Another manufacturer tells WSJ that its current backlog is four times the size it’s ever been, prior to 2021. “The maker of flatbed trailers briefly shut down production in July as it awaited delayed materials,” the publication reports, “and now is holding twice as much inventory as it normally would, amassing a stock of items such as tires to guard against future shortages.”
Procurement’s Role in Recovery
In a new report, the Chartered Institute of Procurement & Supply (CIPS) and RS Components explore the current state of maintenance, repair and operations (MRO) procurement. It’s too early to say if the crisis caused by the COVID-19 pandemic is going to end anytime soon, they say, since new variants are still emerging, prompting governments across the globe to continue to close borders and impose lockdowns.
“But we can see that the world of post-pandemic procurement is beginning to take shape,” CIPs and RS state in their report, 2021 Indirect Procurement Report: From Disruption to Recovery. Despite the widespread disruption caused by COVID-19, the organizations says that the fundamental challenges of indirect procurement continue while issues like sustainability and ethical sourcing are also rising to the top. They see technology as an enabler that can help “change ways of working and make procurement more efficient,” and point out that pandemic-driven trends like remote working are likely here to stay.
Looking ahead, CIPS and RS expect that “some suppliers will fail” to successfully navigate the current crisis and point out that increasing lead times will bring a renewed focus on risk management. “Although costs could rise, automation and digital tools offer the prospect of being able to do more with less,” they point out.
“Through it all,” they conclude, “our survey shows the procurement profession playing a key role in the survival of their organizations through the pandemic and being ready to lead their [businesses] into the COVID recovery as it gathers pace.”
