How the supply and procurement function is strengthening its response to disruption
When the pandemic hit, restaurants closed or served fewer diners. That meant not only was less meat being eaten, but also hygiene products were being consumed by hospitality businesses at a greater rate. As a result, pet food companies couldn’t source as much of the restaurant meat by-products that are their figurative bread and butter. And, companies supplying hygiene products had to amp up, or drastically reimagine their supply chains to accommodate changing needs.
This is only one example of the disruption that has challenged the world’s interconnected supply chains over the past two plus years. But rather than leaving shelves empty or – regrettably – dogs and cats hungry, supply and procurement professionals have risen to the challenge, breathing creativity and change into their roles.
“The muscle that I’ve been trying to build is our resilience to changing events, to things not going to plan, to all of a sudden or a curveball being thrown in. I think our ability to accept that and to almost thrive in it is almost the 2.0 of the supply chain/procurement profession in dealing with disruption,” Avin Krishnan, vice-president supply chain Europe at Diversey, says.
That sentiment was echoed by other speakers at a recent roundtable on supply chain resilience. Procurement and supply leaders agreed that the function itself is changing due to disruption.
Not only do supply and procurement have to maintain consistent operations amid a challenging global landscape, but they have the newly added onus of balancing cost with sustainability and resilience.
Ryan Nied, procurement director, category transformation & innovation at bp, says the teams working within supply and procurement are changing. “There’s this conversation of breadth versus depth in terms of expertise in the function.” Nied’s team is currently “category agnostic,” which has infused bp with a more agile procurement function full of people with useful skillsets. He adds: “You almost need a new set of capabilities to prioritise the most important and riskiest categories and areas of opportunity. And that’s changed a bit. There used to be very rigid swim lanes around this is my category.” This shift from deep expertise in specific categories has influenced the way his team will be structured and will work in the future. But it’s no bad thing, in fact, agile teams will help bp prepare more effectively to mitigate risk.
Scott Spencer, SVP global strategic accounts at Avetta, a supply chain software provider, adds that greater access to data is improving resilience and agility within the supply and procurement function. With the ability “to look for leading indicators” across the global economy, companies can proactively prevent disruption from affecting their supply chains.
But change is also apparent in the ways in which supply and procurement professionals approach their relationships with suppliers. Working more closely with suppliers – and in a more holistic way – has enabled many companies to thrive despite recent disruption.
Spencer says: “As we look to diversify the supply chain, I think there’s a huge responsibility upon us, as procurement and supply chain leaders, to educate the supply chain on what things mean and what we expect as we look at them from an ESG perspective. How can we help them progress and move their company forward as we engage them more?”
Mars Pet Nutrition’s chief procurement officer, Paul Gardner says he has approached the changing supplier relationship with an air of humility. Others agreed that it was unproductive for large companies – no matter how well-intentioned – to inform farmers or small business owners how to change their operations to meet the needs of those they supply. Rather, relationships should be carefully cultivated with suppliers to ensure receptiveness to change, particularly around ESG initiatives, and to encourage shared best practice.
Gardner says relationships with suppliers are an absolutely crucial step in improving sustainability and resilience throughout the supply chain. “When we’re talking to the suppliers with our requirements around sustainability or transparency, a big part of it is just sitting and explaining why it’s important to us because many of them aren’t brand owners. They don’t understand what your brand is serving in terms of customers and consumer,” he says.
The perennial focus on cost and short-term goals around budgeting and finances is adapting as supply and procurement leaders consider long-term aspirations like continuity of supply and sustainable business. “I see that as an amazing opportunity and the progression of the function,” says Nied. At bp, Nied works to procure human capital, meaning his role necessitates community stewardship and a sense of social responsibility. “There’s a humanitarian aspect of what we do,” he says, adding that during Covid-19, employees and contractors working in refineries or on rigs needed more support. “If we didn’t give them that support, quite frankly, they weren’t going to have the staff to be able to help with the continuity of our operations. We had to go the extra mile to understand the state of how the crisis was affecting their operations.”
Continuity of supply and resilient supply chains have become incredibly important considering the conflict in Ukraine and supply chains across Europe have been disrupted. Companies unprepared for conflict – or climate or transportation – disruption will have less robust supply chains and will have a harder time responding to disruption.
For Mars Pet Nutrition, that concept hit home during the pandemic. Interdependency within its supply chain had a big impact. With fewer animals being consumed by humans, the supply into the pet food industry lagged. “Would I have thought five or 10 years ago that we’d be looking at restaurant and hotel fill rates as a potentially leading indicator as to how my supply chain will be filling up?” he asks. Mars had to respond with creative solutions for supplying, warehousing and distributing its products to keep pets fed throughout the pandemic.
Krishnan also had to adapt as market dynamics evolved rapidly through the various stages of the Covid pandemic as markets shut down and opened up with limited notice. Nearshoring helped Diversey remain robust in response to changing consumer needs. Krishnan says: “The reframing of the supply chain to be much more dynamic, and to be much more sourced locally or sourced regionally to react quicker to customer demand, as opposed to only being incentivised by sourcing based on lowest cost, is something that I think is quite exciting for us. As we support the communities we live in, and the areas we live in, this now involves investing in that infrastructure that then has also supported us.”
If companies can build relationships with their suppliers, they will be able to better communicate their needs, and get better results out of their suppliers in turn. Gardner says of agricultural suppliers: “They are guardians of the territory they farm. They look after the planet for us. You’re trying to encourage them that they’re doing a good thing with that, but how can we do something different that improves the land that you’re working on but helps me in my sourcing?”
And to do this, a clear understanding of the supply chain and the risks posed to it is crucial. Spencer says: “Understanding the data; understanding where our risks reside and gathering that to look for trends on a global level is going to make us more agile and more prepared to deal with these disruptions on a proactive level.”
Nied says procurement and supply leadership has “an opportunity to connect a broader set of groups together to drive a greater purpose.” It’s all interconnected. Disruption puts pressure on the supply chain, forcing change. The supply chain and procurement function adapts to improve transparency, build stronger relationships and ensure sustainable sourcing practices, thereby resulting in a stronger, more resilient supply chain.