Strategies To Address Procurement Woes In a Volatile Supply Chain Market (Turning Chaos Into Control)
Part One: The Challenges
Change is the only constant and the global COVID-19 pandemic had brought this universal truth home in an unprecedented manner. Businesses across the globe had found themselves faced with severe supply chain and sourcing challenges, leading to higher volatility and higher risk. In the face of such bottlenecks, traditional approaches to supply chain and logistics management were no longer effective or feasible.
Viability amidst volatility
It is no secret that one of the things that make businesses thrive is stability in processes. The pandemic and the ongoing war, however, disturbed the very foundations of stability and compelled organizations to withstand a highly volatile supply chain environment. Here are some of the challenges faced in the prevailing procurement environment:
1. Building capacity is now costlier: One of the main characteristics of the present sourcing market is the exponential rise in the cost of shipping. The rise in container freight and air freight has made it drastically difficult for businesses to build and sustain capacity and stability. For instance, before the pandemic struck the world, the freight for the China to USA route was around $1,500 (for a 40-foot container). This price is now anywhere between $10,000 to $15,000, making it financially nonviable.
2. Preserving the bottom line is now harder: With the rising cost of materials as well as shipping costs, organizations are increasingly grappling with higher operational costs. The problem is exacerbated by the constant decline in demand and, in turn, revenues. The combined effect is a significant drop in the bottom line of organizations.
3. Continuing with Legacy technologies: At a time when digital procurement is being looked at as a key driver to solve businesses’ supply chain woes, several organizations are still continuing with old and obsolete legacy systems. Not only are those systems time-consuming and cost-heavy, but they are also non-responsive to factors such as price compression, capacity changes, etc.
4. Switching to spot bidding for logistics: Traditionally reliant on annual freight contracts with low prices, businesses now have to manage the necessary switch to spot pricing in logistics. The restrictions in the capacity and movement of air cargo in the wake of the pandemic have brought spot price bidding to the fore, placing a higher than ever before pressure on their operational costs.
The Bottom Line
In order to survive and thrive amidst a highly volatile supply chain environment, businesses must turn to digital procurement and technology. This is where Moglix can help you transform your business through our Catalog Based Buying, Automated Workflow, Enhanced Visibility, and Integrated Procurement Solutions. Know more on our website.