Managing the Supply Chain in difficult and challenging environments

Written by Joneil Palenzuela, Senior Procurement Advisor

Achieving Business as Usual (BAU) or steady state in an organisation is a common goal after change events, such as mergers or business acquisitions. Based on the size or complexity of the change, a complete hand-over or practical completion of a project or a program, is delivered by the supplier to the customer/buyer to close the transaction.

In a challenging environment, and to ensure a smooth transition to a steady state, it is critical that all parties deliver on all agreed commitments to enable ongoing business operations to be uninterrupted, and allow the new business state room for growth and innovation.

As an example, the BAU state in the banking industry enables trade and economic activity to flourish for the benefit of organisations and the public. Integrity is maintained through the application of rules and regulations to ensure transparency, probity, and efficiency in undertaking financial transactions by all parties.

Catastrophic changes in the industry occur when sustainability of the operation regulations fails – non-compliance, whether wilfully or through lack of oversight, leads to situations like the USD 1.3 billion loss and collapse of Barings Bank in 1995, or more recently with Westpac in 2022, where Anti-Money Laundering Act breaches resulted in an AUD 1.3 billion penalty.

Similarly, in government (particularly local government), governance and oversight are mandatory to ensure regulatory compliance. Procurement practitioners not only need to have clear policy and task delegation but must be provided with training with the necessary tools and procedures.

Procurement practices need to be continuously ‘tried and tested’ during normal business operations for sustainability, ensuring business continuity when subjected to challenging environments (e.g., from disease, war, or climate change) and may result in delays or absence of goods or services. Below are 10 tips that will assist managers to deliver during challenging times.

10 Tips to deliver Sustainable Supply Chain Management (SSCM) for Local Government

1. Develop a Sustainable Supply Chain Management vision embedded into the Council’s existing strategies, ideally during the development of the Community Strategic Plan to ensure clear alignment and application to the unique Local Government Area (LGA). Alternatively, based on current circumstances, include the SSCM vision to be part of your current procurement policy, procedures and actions that will mitigate supplier risk. It is best to pre-emptively set direction during operational stability rather than during challenging times as delays and issues in such situations will hinder comprehensive planning due to the absence of resources and pressures of returning to BAU. The 2nd and 3rd quarter of the calendar year is generally considered to be a challenging period due to budget pressures.
    
2. Supplier Risk Management assumes that suppliers have been categorised according to whether they are strategic, based on organisational and community requirements, or are ‘a dime a dozen’. Regardless, a risk profile, likelihood, and mitigation must be set in place. From this perspective, it is best practice to assess your business continuity plans, particularly those not exercised during disaster recovery (like loss of power to the building). Without this, don’t be surprised to see no one receive your call due to resource constraints or failure in implementing communications strategy and planning.
    
3. Availability Management processes like those practiced in Information Technology (ITSM) or essential utilities like electricity and food supply is critical and cannot be ignored. This approach will ensure that both suppliers, and goods and services are continually evaluated, assessed, repaired, and replaced without interrupting regular operations. In Information Technology parlance, it is like having persistent network monitoring, alerting, and resourcing to ensure data is always functional and available without delays or system errors.
    
4. Resiliency development of SSCM through testing, engaging, and diversifying the supply base, strengthening the ability to pivot and take alternatives to guarantee supply. It is not only about ensuring service or supply contract service levels but incorporating language and the essence of resilience into the business strategy (Tyler, 2021).
    
5. Operations Management takes a backseat in most organisations, only taking centre stage when delays are being experienced and customers complain. This can also be true during disaster recovery or a business restructure initiative. To minimise the impact of such events, managers must be outcome oriented, have a communication strategy, succession, and business continuity plan, as well as provide training, remuneration and incentives to maintain a professional and engaged workforce in both contract and supplier performance management.
    
6. Categorisation and Segmentation of Supply is a feature of procurement that needs to be clearly identified and managed to ensure any market changes are considered against the various elements that impact supply. Supply segmentation with appropriate risk mitigation can be activated, when the situation arises, to enable resiliency in the supply chain.
    
7. Establishing a Register of Pre-Qualified Suppliers (RPQS) for all categories of supply is key to building an ecosystem that supports the local operations strategy to deliver services to your local community, regardless of the change in situation.
    
8. Strategic Relationship Management (SRM) means getting proactive and establishing long term service and business alignment. It is a business process that needs to be agreed upon with the contracted and/or prospective service provider to ensure it is embedded through Operations Management alongside work instructions, underpinned by agreed business service levels and KPIs. Organisations should have account management plans with key contacts, through developing a communications strategy and plan, ideally incorporating joint-business planning, leading to partnership ventures.
    
9. Artificial Intelligence (AI) and Data Analytics are recent tools currently being adopted to effectively manage the supply chain. These tools enable real-time understanding of supply pathways and interdependencies through challenging market conditions that impact delivery of goods or services. Data management processes and standards must first be established, and henceforth the integrity of data must be maintained to ensure accurate reporting of trends. Trends within the supply chain inform the optimal decisions for supply base management.
    
10. Implement a 100-day plan to examine the sustainability of your supply chain and put in place an RPQS today. An RPQS can cover all Council requirements to deliver services to the community, including professional services, trades, plant hire, goods, and materials in condensed into large contracts after tender.

If you need assitance developing or implementing any of the above tips, or you would like support in any other area of procurement, please contact Brian Jackson, Director Consulting Services, bjackson@wearepeak.com.au or phone 0467 767 825.

Tyler, R.E. (2021). Reset your business strategy. Supply Management 26(1) P16. https://www.cips.org/supply-management/analysis/2021/january/how-to-reset-your-business-strategy/