The Importance of Supply Chain Relationships During a Crisis

We know that with globalization and new technology, the role of procurement has changed. Where the concern used to be only about savings, now savings need to be weighed against other issues. Never has that been truer than today when the entire world is facing this expanding COVID-19 crisis.

At some point, hopefully sooner rather than later, this crisis will pass, but the role of procurement will continue to evolve. While savings will always be an important element in procurement’s role, the important question is: what is procurement really trying to save? That question is important because business is continually seeing political mandates, new regulations and social pressures that are driving change at an unprecedented pace.

When considering optimization of the supply chain, cost will always form part of the conversation. When a company can effectively reduce costs within the supply chain, it can then reinvest that money back into the organization. This holistic approach to cost saving lets a company support its needs, beliefs, or even employees to help bring about changes that will actually have an impact.

Supplier relationships have never mattered more

One of the most important things companies should do is constantly be improving and optimizing the way they develop and maintain relationships with suppliers. To get the best results and a positive, long-lasting supplier relationship, there needs to be an element of a partnership between procurement professionals and their supply chain. Good supplier relationships help to create value for both sides of the agreement – whether it’s a new product, process, or an improvement that can make everything more efficient.

When a scarcity of materials is causing companies to compete against one another as well as against states and the federal government, those relationships become increasingly important. The key piece of supplier and vendor management that is often overlooked is the ability to be creative and innovative to help challenge the status quo or to respond to unforeseen issues, like today. New regulations or social pressure can also have an impact on the way a company acts. Its reaction to these pressures are either going to change the way the company is perceived or it will change how the company will need to do business going forward.

With the current crisis, more and more companies are finding themselves having to focus on so much more than dollars and cents. There are, sadly, companies that may not survive the COVID-19 pandemic; yet others have never played a more important role, along with their suppliers. They produce and supply the medicines, food, paper goods, and other essentials that enable the population to stay home and, hopefully, stay healthy. Some companies are actually changing the products they produce to meet the needs of the country and the medical community; actually retrofitting factories. Procurement must then focus on getting the materials needed for these products. This is a time when procurement and suppliers are playing a vital role for social good. We really are all in this together.

Read my IdeaXchange blog on the need for innovation in dealing with the pandemic.