What you need to know about proactive procurement for risk mitigation. Part 1

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What you need to know about proactive procurement for risk mitigation. Part 1

In its 1990s heyday, a trend in logistics and procurement—pioneered by companies like Dell and Toyota—was to create competitive advantage from the tightest, leanest, most connected supply chains imaginable. It looks great on paper—and in ideal conditions, works brilliantly. 

Trouble is, conditions in the real world aren’t ideal. 

In reality, companies suffer resource shortages; key relationships shuffle between jobs; business processes and product quality change over time. And—obviously—there’s that whole global pandemic thing. If you have a years-long purchasing agreement with a single supplier, there are problems ahead if that supplier’s costs double overnight. 

And that’s been the problem with traditional procurement so far. It’s reactive: waiting for red flags to appear, and then taking action to address them. In the turbulent 2020s, digitally savvy enterprises need  to make it proactive. Putting procurement where it belongs: at the heart of strategic advantage.

Below are two lessons we’ve learnt at Scoutbee about how proactive procurement both protects and boosts your existing advantages, by mitigating risk all along the supply chain. Take a look—and if you find your head nodding in agreement, we’d like to invite you to take our AI- powered supplier intelligence and discovery solutions for a trial run.

See your supplier landscape as a whole

Before you can move the world, you need a place to stand. So first up, make sure you have a complete overview of your existing supplier network. And yes, we realise that’s a big deal.

According to Forbes, the average large enterprise has tens of thousands of suppliers. For instance, our client Audi has 14,000 direct ones, and that’s just those who sell directly to the linked circles of Ingolstadt (a city located in southern Germany); each of those will have many of its own. 

Top names in consumer goods like Unilever (also a Scoutbee customer) are much the same.  

In fact, according to Forbes,  it’s rare for a global 1,000 firm to even know the precise number. And that means vital information just isn’t there. 

That’s why Scoutbee’s first lesson is to draw up a map of that landscape. To give you an overview of all suppliers, across all BUs, bringing together data previously siloed in different parts of your business. 

By comparing data from of your supplier web—even comparing those offering similar services—: who’s staying competitive, who’s falling behind—you can foresee trends ahead of time, and optimise your supplier mix before any shortcoming turns into a problem. 

Acting beats reacting. That’s lesson 1.

Abnormal events are normal—so plan for them

Global pandemics are major events—but they’ve been happening every few decades since the time of the Silk Roads. A single political incident can stop exports for a whole nation, but messy politics is a regular thing, too. (No surprise there.) And a ship stuck sideways in the Suez canal makes for big headlines … but in reality, clogged canals cause many delays a year. 

What might seem like one-off catastrophes actually happen all the time. They’re perfectly normal events, in any sector and every economy. At Scoutbee, we believe such risks can be mitigated without the massive costs of maintaining multiple contracts or relationships “just in case”. 

Imagine seeing your list of approved suppliers in the context of the entire supplier marketplace, including companies you’ve never done business with before … but who are potentially suited to do business with you. Complete with information on where they are, how they operate, the markets they have experience in.

Such knowledge lets you see who’s able to take up the slack if Event X hits supplier Y—and switch in an eyeblink. It’s actually an approach FMCG giant Unilever uses to broaden its supplier base, making use of our AI-powered supplier discovery.

From the extinction of the dinosaurs to the upheavals of Covid, disasters have always happened. With proactive procurement, you can treat “unusual” events as normal and expected, you can not only survive them—but thrive.

Once the risk is recognised, it can be planned for. Often, with the supplier you know and trust already. Again, it’s proactive not reactive. 

Any procurement professional knows how creative and challenging the job can be all the same. Getting your mix of suppliers right is a great start—but there are further opportunities for bulletproofing that mix. Alternative sourcing. Contingency and scenario planning. Supplier network diversification. And Scoutbee’s suite of solutions, starting with AI-powered supplier discover, Streamline, can help you with all of them. 

If you’re ready to (pro)act, we’re ready to talk. Book a demo here.