IS THIS THE END OR BEGINNING?
By: Bulk Mro
Tags: Supply Chain, Logistics, Business Strategy, Procurement

Today’s supply chain is about the survival of the fittest.

Is the glass half-empty or half full? This proverb perfectly describes today’s market and the supply chain ecosystem.

Many have been disheartened due to the current COVID19 pandemic. Few, if any, have leveraged the market and its critical situations. The oil market already weathered a storm due to the price war between OPEC and Russia. The Indian currency is struggling to settle at it’s new high, at INR 76/USD. Consumption of petroleum products across India has reduced to 30% vis-à-vis the same month last year. The stock market tumbled across sectors due to the global lockdown.

During this Covid-19 job crisis, many students and procurement managers approached us with following queries and conflicts in mind.

In short, the answer to all the above questions is sit back and relax. This is going to be the best time for the Procurement & Supply chain industry to thrive.

Reason 1: “A Penny Saved is Penny earned.” This is the time to negotiate hard and save some pennies in every contract you execute. Do not think about the efforts vs savings achieved at all. Negotiate contracts irrespective of value and results. Your company needs you the most in these times. You can play a very critical role in savings on raw material cost, maintenance cost etc.

Negotiation is not just about reducing the cost or price. If you are a good negotiator, you can play on Lead Time, Credit Terms, AMCs post Supply, Logistics cost, Quality and even on the Terms of the Contract. Your agenda should be to give your company the maximum benefit with your negotiation skills.

Reason 2: Get on to the Aggregation model. One of the most important principles of procurement is to consolidate the requirements and get volume discounts from the market. As an individual entity, you may be doing your best in consolidation of your own requirements and asking for volume discounts.

But imagine the savings you can achieve by consolidating the requirements of the entire sector. There are companies, who work on the aggregation model and provide benefits of volume discount by consolidating the requirements of multiple companies. Get yourself associated with aggregators and reap the benefits of volume discounts.

Reason 3: Procurement is not a very difficult job or a position. It can be easily replaced until the time you know your job best or you start procuring strategically. My favorite example is of a homemaker visiting three different vegetable shops and buying vegetables from L1 vendors. You are no different if you are also just approaching three different vendors and placing orders on L1 Vendors. It’s time to do strategic sourcing.

Reason 4: Dynamic Budgeting — You may have always heard of making procurement budgets based on the sales forecast. It’s time to change the conventional way of budgeting and switch to dynamic budgeting.

Make and forecast budgets based on the different revenue ranges. Help your company decide on the target revenue range and accordingly decide the cost range to be incurred. It’s time to be proactive.

Reason 5: A friend in need is a friend indeed. In the supply chain, help your clients now when they need you most. In this lock down period, all manufacturing clients have more or less started their production and if production has started, obviously, there will be requirements.

At this time, establish a supply chain to help your clients and leverage these benefits in future. Suppliers are ready to supply and buyers are ready to buy. The challenge is to connect suppliers with buyers. In addition, today’s market is all about accepting challenges and giving your best. If you can link your supply chain at this time, you are ready for any challenge in future.

Evolve with the times to survive. No one is sure on the COVID 19 timelines. Let’s be prepared and let’s be ready to fight, as only the fittest one will survive.

About the Author: Nutan Bala is the Vice President, Procurement, at Bulk MRO.