How Resilient is your Sourcing Function?

If you lead the sourcing/procurement function of your organization, odds are that you are not a happy camper these days. A combination of geo-politics and Mother Nature continue to make life hell for you - Volcano eruptions, snow storms, earthquakes, tsunamis on one hand and terrorist attacks, union shutdowns, civil wars, terrorist attacks on the other. You scratch your head and ask - what next?

So you have been reading all those stories in the press that are highlighting the inventory/parts shortage impacts to everything from automotives and electronics to pharmaceutical, hospitality, and heavy equipment sectors. According to analysts, manufactucturing sector will not return to it's pre-quake levels till at least October of this year. Nobody likes uncertainty, specially the markets. But you are a smart and savvy sourcing manager and you planned for all this - correct?

Let me ask you a couple of questions to see how smart you’ve really been lately –

1. Did you consider the above risks in your procurement planning?
2. If so, did you hedge your risks by identifying different sourcing options?
3. Did you actually engage these sourcing options during normal times?
4. Did you have a game plan in place to quickly/gracefully scale your sourcing options?
5. Did you actually rehearse your game plan during normal times to validate its capabilities and costs?

If you missed on any one of the above steps, my guess is you are paying the price today. Like they say, if you fail to plan, you plan to fail. Testing the strengths of your supply chain functions during normal times is one thing but proving them out for abnormal times is what really prepares your organization and gives it the confidence needed for the tough times. Having a strategically sourced mix of suppliers and partners is an absolute must for today and the future. Sourcing and procurement is not about getting the cheapest or fastest options but also looking at the closest and safest options. Sourcing requires you to optimize a number of variables depending upon your organization’s needs and risks, so if you decided to drop or discount an important variable for whatever reason, you better think again. You might be getting kudos from your boss today for saving all those dollars but will get twice the shit from the same boss tomorrow when your shortcuts result in shortage of parts, shutdown of the lines, and elimination of shifts.

Smart managers are the ones who take a risk-based approach when designing the sourcing portfolio and are able to sell this to their senior leadership. Costs and quality typically drive the procurement planning but be sure to plan for the worst case and paint the scenarios where your firm might lose customers, orders, market-share, and goodwill. That I think will get the attention of your leaders.

If you liked what you just read, Share It (link below). Thanks!