Recent increases in inventory shortages, manpower issues and capacity reductions have plagued companies across industries, making supply chain management increasingly complicated. Many executives have struggled to ensure continuity of supply during disruptions, confirming findings from global professional services firm Accenture Plc that only 4% of today’s supply chains are “ready for the job.” to come up “.

To meet the known and unknown challenges of current and future supply chains, companies must adopt modern procedures and technologies to ensure business continuity under all circumstances.

The consequences of the disruption

One of the biggest issues for manufacturers is the current turbulence in the shipping industry. Port closures like Ningbo-Zhoushan in China and arrears from blocking the Suez Canal earlier in 2021 have limited transport capacity. Shipping costs have risen so much that a US manufacturer has filed a lawsuit against two of the world’s largest shipping companies, a sign of growing dissatisfaction with exorbitant freight rates in the cash market.

Transport is not the only one affected by the recent crises. Extreme weather events and the ongoing pandemic are also leading to direct and indirect material shortages. Constraints on the supply of raw materials, including those needed for semiconductors, PPE and various plastics, have resulted in plant closures, price increases and production delays during a period of particularly high demand .

Such disruptions have led to a record number of canceled contracts and increased spot auctions. When supply and capacity are tight, previously negotiated rates are often tossed out the window, leaving procurement teams to handle dozens (if not hundreds) of cash tenders at a time, while they are scrambling to find new supplies.

Responsive spot auctions are incredibly inefficient at scale. One-off offers always require a series of repetitive steps: contacting potential carriers or suppliers, sharing specifications, collecting data, and making award decisions. Because they are often conducted outside of a formal online procurement process, Offline One-Time Auctions generate untracked data that teams cannot leverage to track spend, forecast, or report. This practice can also introduce a bias, when companies give preference to certain suppliers for the sake of speed, thus reducing the competitive tension which can give them a better offer.

New problems, old strategies

Many supply chain managers failed to predict the sheer volume of canceled contracts or the increase in spot auctions, among other challenges. Now, as they manage the fallout, it is impossible to mitigate the impact of new issues with old and outdated processes and technologies.

In a future readiness study conducted by Accenture, supply chain executives cited the lack of cohesive strategy and technology as the biggest obstacle to building future-ready systems. Teams that rely on archaic processes and legacy solutions cannot effectively resource themselves from new transportation or supply lines. So when a need for supply arises, buyers often turn to what is familiar to them.

In many cases, tenure can be a major obstacle to success. Successful leaders understand that to stay competitive and guard against disruption, they must onboard new suppliers and identify supply lines that are no longer valuable. Buyers who neglect emerging suppliers to preserve existing relationships often do so at the expense of innovation and resilience. For example, comparing incumbents to historical tariffs allows you to take into account changes in prices and market conditions and better identify which incumbent suppliers are setting their prices according to the market and which ones can take advantage of their position. to increase costs.

In an effort to upgrade these methods, many procurement managers are revamping their old systems and looking to streamline processes with optimization and automation technology for a more modernized supply chain.

Optimization and automation solutions

Respondents to the Accenture survey who said they were “ready for the future” were twice as efficient and three times as profitable as their under-prepared peers. A key way to achieve this level of readiness is to optimize processes wherever you can, especially in the procurement function.

Optimization enables procurement teams to balance cost and speed goals, support large-scale events, give vendors flexible bidding options, and go beyond the business model. ‘award of the “lowest price”. With the right solution, teams have the ability to handle everything from one-off bids to large-scale tenders, with a vendor-friendly interface that improves your direct material allocation decisions.

Many executives are also turning to automation, especially in shipping and air transport. AI-powered procurement robots can establish one-off tenders and mini-tender events in minutes, while managing and automating everything from inviting carriers to collecting offer data, through the generation of award recommendations based on a set of criteria. Up to 90% of this work can be automated, improving scale and efficiency.

This level of digitization not only produces better award decisions with more speed and insight, it also helps teams save time and money. Digitization goes beyond cost savings by integrating efficiency, CSR goals and time savings into a company’s bottom line. By reducing tedious and monotonous tasks, optimization and automation technology enables purchasing professionals to do what people do best: focus on supplier relationships, achieve broader business goals, and stimulate innovation.

Although only 4% of supply chains today are well prepared for future challenges, almost 65% of supply chain managers view their operations as “predictive” or “information driven”. Those who are already using advanced data or analytics have a clear opportunity to strengthen their systems with modern automation approaches. Disruption is going nowhere, and by leveraging optimization and automation to create a future-ready supply chain, companies can abandon outdated approaches and move towards modernity. The ability to face the future with increased agility, continuity and resilience depends on it.

Alan Holland is founder and CEO of Keelvar.