The past few years haven't been easy for many procurement and supply chain professionals. A global pandemic. Geopolitical tensions. Rapid changes in customer demand. All of these factors, among others, have posed a variety of supply chain procurement challenges.
At CenterPoint Group, we're always working to help clients overcome obstacles to a strong, responsive supply chain. Keep reading to find out the kind of problems today’s procurement managers and teams face, as well as strategies for mitigating them and ensuring your organization has the raw materials, goods, and services it needs, on time and in the right quantities.
Some Pressing Issues in Supply Chain Management
Managing the MRO supply chain process has always been a complex task. But developments in the past few years have made supply chain procurement challenges even more challenging.
For example: The early days of the COVID-19 pandemic saw a serious shipping container shortage. This shortage meant manufactured goods languished in ports and storage facilities instead of making their way to their destinations.
As the pandemic has eased, so has this shortage. But the global supply chain now has too many shipping containers on its hands. Containers are more available due in large part to "blank" or canceled sailings. Retailers have too much inventory, rather than too little. Consumer demand is falling amid worldwide inflation and, in the U.S., a desire to rein in discretionary spending.
What’s the upshot for your organization’s procurement and supply chain management? Lower demand for freight and cargo may mean your team has a harder time getting what your MRO inventory needs in a timely way.
Even standard office supplies, most of which China exports to the rest of the world, are proving elusive. China’s strict COVID controls, lifted only at the end of last year, shut down manufacturing, causing supply chain challenges for companies worldwide.
Here’s another case in point: paper. While the long-predicted “paperless office” has yet to fully emerge, the pandemic has accelerated a trend toward digital alternatives. Offices operating at less than full capacity need less paper. Employees working remotely tend to use less paper, sharing files via email, cloud drives, and messaging apps instead.
But the paper industry was already “changing, morphing, and developing,” and undergoing “the most substantial transformation it has seen in many decades,” according to McKinsey & Company’s Peter Berg and Oskar Lingqvist.
Paper manufacturing companies are consolidating, which means fewer suppliers. Paper mills are being converted to produce more corrugated boxes than cut sheets, to keep up with e-commerce’s demand for packaging supplies. Some facilities are shutting down entirely.
The price of wood pulp and paper used in corrugated boxes increased more than 25% between 2020-2021. Higher fuel prices, higher labor costs, and the supply chain disruptions mentioned earlier have also contributed to paper’s soaring price tag.
Add in the frustration of waiting anywhere between three weeks and three months for paper coming directly from a mill, and it’s no wonder some procurement teams have resorted to buying 40 cases of paper individually from a "big box" office supply store, rather than buying more economically by the pallet.
How Procurement Teams Can Clear Supply Chain Hurdles
Procurement professionals can mitigate today's tough supply chain management issues in several ways.
First, strengthen your existing relationships with external suppliers. Strong, long-lasting partnerships help foster trust, communication, transparency, and a constant supply of raw materials, goods, and services. Such relationships can lead to better negotiating power, allowing you to achieve cost reduction, better payment terms, or even exclusive benefits.
Second, as part of your strategic sourcing, diversify your supplier pool. Relying on a single supplier or geographic location carries unnecessary risk. But a diversified portfolio spreads the risks associated with supply chain disruption over different suppliers
and territories. Always be researching and identifying potential suppliers who are capable of providing the same quality standards as your current suppliers.
Third, leverage technology, including supplier relationship management software and analytics tools. Procurement managers must proactively gather data to identify potential supply chain bottlenecks. Having insight into lead times, shipping schedules, and production cycles can improve your MRO inventory management. This insight helps alleviate or even prevent problems.
CenterPoint Can Help Your Procurement Function More Effectively
CenterPoint Group is an industry-leading, certified minority group purchasing organization. We've built relationships with national providers who have deep supply chains, and our clients reap the benefits.
We deliver extensive category expertise, helping you meet your MRO inventory levels—and thus, your company meet its business goals—as quickly and cost-effectively as possible. And as part of our comprehensive approach, we’ll do your analytics for you, helping you identify opportunities for saving time, money, and resources.
Want to know more about how CenterPoint can help your organization mitigate today's supply chain procurement challenges? Request your free pricing analysis today.