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Pivoting in an Uncertain Environment - Key Components of an Effective Supply Chain

The toilet paper shortage that made news headlines at the beginning of the COVID-19 pandemic crisis is a stark reminder of how vital supply chains are in our day-to-day lives. As a not-for-profit collaborative sourcing organization, OECM has witnessed the good, bad, and the better in the world of supply chain management and logistics. As part of the 2021 Supply Chain Canada National Conference, held virtually this past October 18 – 22, OECM’s directors came together to examine the Key Components of an Effective Supply Chain, and deconstructed the several facets of an evolving public sector procurement landscape.

OECM’s Director of Customer Relationship Management, Jim Hadjiyianni, Director of Strategic Sourcing Solutions, Perry Arzumanian, and Director of Supplier Relationship Management, Pooja Nagra were supported by long-standing OECM Board Member and Chair of OECM’s Customer Council Committee, Kevin Kobus, who facilitated the discussion.

The panel discussion resulted in an insightful exploration into the evolution of supply chain, which included a focus on best practices, implemented strategies, the path towards leveraging innovation and the supply chain as a service. The following is a recount of key insights and discussion takeaways.

Pivoting in an Uncertain Environment - Key Components of an Effective Supply Chain

The Evolution of Public Sector Procurement

In the last two decades, the public sector procurement landscape has evolved to accommodate several social, political, and technological advancements that have profoundly influenced Canada’s supply chain. Business models expanded to adapt to globalization, outsourcing, and automation, which in turn affected how organizations managed their relationships with suppliers, from manufacturing, distribution, to the sourcing of products and how to sell and market them. “Supply chains had to learn to quickly adapt and modify processes to keep up with innovation, global interdependency, and the inevitable competition brought on by the rapid changes by working with their suppliers as partners,” notes OECM’s Pooja Nagra, Director of Supplier Relationship Management.

How customers perceive suppliers has also changed over time from viewing them as contractors or corporations to vital partners that provide critical products and services. Director of Customer Relationship Management, Jim Hadjiyianni agrees that “today’s customer has become much more knowledgeable across all elements of the supply chain, and customers now demand improved supply chain flexibility, increased efficiency, innovative approaches, and high-risk management to ensure quality service is in compliance with trade agreements.”

The Pandemic Paradigm: COVID-19’s Impact on Public Procurement and the Value of Collaboration

The COVID-19 pandemic brought on unprecedented challenges that caused massive disruptions in global supply chains, shut down economies, and accelerated business processes at a swift pace. The urgency for Personal Protective Equipment (PPE) and safety supplies generated an unforeseen demand in an already unpredictable and chaotic environment and triggered a response from procurement organizations to fast-track their action and delivery plans. OECM’s Director of Strategic Sourcing Solutions, Perry Arzumanian shares his experience, “At OECM, this meant that planning horizons which are normally 2 or 3 years now needed to be shortened and focused on key contracts. In order to deliver on an accelerated plan, we worked internally to find efficiencies in our processes, leveraged technology and brought together as many subject matter experts as possible.” Procurement strategies were also adapted to direct focus on a faster market reach, which resulted in a rise of Request for Supplier Qualifications (RFSQs) in comparison to Request for Proposals (RFPs) because of the shortened timelines the former approach offers.

The pandemic influenced two core areas of the supply chain model – collaboration in terms of how stakeholders worked together to procure and deliver the critical supplies, and transparency among key partners. Hadjiyianni notes that some of the best practices implemented at OECM were the quick mobilization of the supplier community to share product availability and pricing, working closely with manufactures to secure supply, prioritizing workload, and engaging with facilities experts to seek strategic advice on behalf of organizations to ensure correct products were being sourced.

The need for businesses and end-users to work collaboratively with suppliers is imperative to ensure secure supply chain links. Nagra shared an example of OECM’s rigorous supplier relationship management program that incorporates contractual clauses, activities, and tools that are compliance-based yet encourage collaboration and partnership. “Our supplier segmentation process allows us to assess the operational risks that some suppliers may pose. We have regular touchpoints with our suppliers that focus on discussions about growth, challenges, and areas for improvement not just in the way our suppliers operate but learning about our suppliers’ challenges and innovative ideas,” explains Nagra.

Supply chain models have changed over time with greater consolidation at an organization level, which contributes to an increasingly effective purchasing process. As OECM’s Director of Sourcing, Arzumanian highlights the industry’s shift towards streamlining supply chains, “we are seeing partnerships between buying organizations such as OECM or even broader consolidation, for example, Ontario’s Supply Chain Centralization initiative and the introduction of Supply Ontario which is meant to work across the public sector system.” The procurement landscape is ever-evolving, but in the last ten years, the supply chain structure has witnessed an evolution at an accelerated rate partly due to the progression of technology and partly due to unprecedented events such as the COVID-19 pandemic.

The Drivers of Change in Supply Chain Organizations

To understand and predict the next big changes to the supply chain business model, it’s important to consider the key factors that are driving change in the procurement world. The core nature of the supply chain makes itself a driver of change for an organization’s strategic and business priorities. The shift in supply and demand, change in customer preference, product innovation, and critical needs for supplies and services can significantly impact how a procurement organization functions. “High-performing sourcing organizations have gone well beyond the transactional nature of purchasing and have shifted to a more strategic mindset especially as business needs are getting more complex. For a supply chain organization to be effective, they need to gain a deeper understanding of business requirements through these relationships, ensuring that they align with organizational priorities,” Arzumanian reiterates.

That’s not to say that the conventional perspective of viewing sourcing as a transactional relationship has entirely shifted – that is a work-in-progress and requires greater trust-building among partners. Traditionally, buyers have sought lower and competitive prices, but they are encouraged to also take advantage of the value adds suppliers offer. “At OECM, upon awarding our contracts to a supplier, we revisit the value-adds that our suppliers propose in their bids, initially and over time through the contract term. Together we establish how these value-adds will be incorporated into their day-to-day business with our mutual stakeholders,” adds Nagra. A good example would be our Platinum supplier partner Dell Technologies, who has frequently collaborated with OECM to provide training services and educational programs for various sectors.

Organizations need to have greater agility and flexibility in their procurement models to support the current customer base. Customers are now a key stakeholder in the purchasing process and their input is valuable in terms of determining how successful or unsuccessful would be the sourcing of a commodity. Hadjiyianni notes that, “supply chain professionals are being asked to purchase products and services that may not have been created or are on the market yet, they are being asked to help solve complex business problems of which the acquisition of a product/service will be the output. Essentially, they are being asked to be a strategic partner at the table.” Strategic partnerships at all levels of the sourcing model and active collaboration are key drivers of change in the current procurement landscape. An effective strategy to build stronger relationships with internal stakeholders would be through introducing prospects for engagement. “For example, spending more time on the development of requirements and facilitation of workshops to ensure that all stakeholders have the opportunity to participate and feel that they have contributed to a contract that will address their needs,” suggests Arzumanian.

The pandemic served as an eye-opener for many organizations, exposing the vulnerabilities within the supply chain structure and compelling many sourcing entities to revaluate their work models. COVID-19 made organizations “realize just how nimble and reactive they can be with their business in challenging circumstances, and it forced us to find efficiencies and exposed the gaps in our processes,” says Arzumanian. Crisis, albeit challenging and difficult to manoeuvre through, can be an excellent opportunity to drive positive change by highlighting inadequacies of the present model and encouraging an organization to implement new strategies and take healthy risks.

The Rise of Technology and the Innovation it Fosters

Technology and its advancements in the procurement landscape have come a long way in the last several years. When we talk about technology in the supply chain framework, we can identify its impacts in all areas of the supply chain structure – whether its software and interfaces that are built to support purchasing processes, data analytics on sourcing and purchasing trends, e-sourcing, or cloud-based approaches towards procurement – technology has taken over, and it’s not leaving. What sets a purchasing organization apart is how these tools are leveraged for decision-making.

Going forward, the procurement landscape can expect to see the increased implementation of machine learning and artificial intelligence (AI) as a key component in purchasing processes. For example, OECM has invested in Customer Relationship Management (CRM) Technology to make better decisions and optimize business outcomes using customer data-driven insights that would ultimately help respond more accurately to their needs. In 2020, OECM implemented Microsoft Dynamics 365 to better coordinate and centralize its CRM activities, and in 2021, began exploring the merits and applicability of AI and machine learning to further understand how to enhance its services and support its customers. Hadjiyianni agrees that “the notion of modeling or predictive analysis is changing the face of customer service and customer relationship management.”

The use of technology in procurement practices improves and streamlines the operational systems and increases accessibility, such as the ability to collaborate with multiple stakeholders on a single document in real-time, streamline approval processes, globalize the bidding process, and ease remote communication. As supply chain professionals, “we have learned to rely heavily upon our communication platforms, automation of processes, data analytics and predictive analytics, and even autonomous robots to increase productivity. All these technological advancements have assisted in improving accuracy and traceability throughout supply chains and ultimately saving both time and money for all involved,” explains Nagra.

In terms of innovation, there is also room for suppliers to come forward with innovative approaches and technology-driven solutions. According to Arzumanian, “Utilizing initial market sounding approaches to have meaningful dialogue with the marketplace ensures that suppliers have the opportunity to fully understand the problems facing a buying organization. The information gathered through this process helps inform the type of advanced procurement models such as Competitive Dialogue or Innovation Partnership, which allow for buying organizations to thoroughly discuss each aspect of the procurement with suppliers prior to specifying the requirements or submitting proposals.”

The Future of Supply Chain

Customers across all sectors are also evolving and their decisions are impacted by greater issues than just price. In an exclusive interview featured in OECM’s Municipal Marketplace newsletter, Thunder Bay’s Manager of Supply Chain Management, Dan Munshaw shared his insights on new value judgments and decisions that are driving current procurement choices. Munshaw noted that in Thunder Bay’s RFPs, “5% of the decision criterion is based on diversity, inclusion, and social justice and 5% of the decision making is based on sustainability and environmental elements.” Value judgements are directing public sector institutions towards organizations that are socially and ethically conscious. This shift in the customer mindset and how well a supply chain organization accommodates this shift will ultimately determine their business trajectory over the next several years.

OECM recently established a reciprocal affiliate partnership with Shared Services West to share collaborative purchasing agreements across each organization’s customer bases, allowing for greater collaboration and expansion of product and service offerings. As the demand for newer products and services grows, strategic partnerships among collaborative sourcing organizations will be effective for all partners. Hadjiyianni concurs, “we need to see a shift across the public sector procurement landscape from us competing with each other to leveraging opportunities to partner where it makes sense as our end goals are the same – to provide customer service excellence to our end user.”

A secure supply chain is supported by several elements, but it begins with effective planning and leveraging established relationships with partners and suppliers to gain key insight before starting the next step of sourcing, which includes relying on internal data as well as the monitoring of other factors such as economic, financial and commodity indicators. Mitigating supply disruption and shortages will also ensure a secure and effective supply chain. “Since the pandemic, we are seeing higher demand for products, which will require organizations to adapt their forecasts and plan accordingly. Governments and large organizations are reviewing their supply chains when it comes to critical goods. Where feasible, companies are trying to move production closer to home, find alternative suppliers and diversify their supply sources. As a buying organization, it is important to understand these strategies and ensure that suppliers are aligned with these approaches and are handling the security of their own supply chains,” Arzumanian adds. Organizations need to regroup and identify their gaps and efficiencies and then strategize approaches to counter those gaps before the next unprecedented challenge hits.

The supply chain landscape’s evolution has been anything but slow over the last few years, and it will continue to evolve at the same rate as the world around us does – fast and furious. As supply chain professionals, it is imperative that we learn to adapt our processes to present-day needs rather than dwell on conventional ways that may have been successful in the past but no longer serve as effective strategies. As the COVID-19 pandemic has demonstrated, effective supply chains are imperative to a functioning society.