Navigating Procurement Amidst Supply Chain Chaos

Photo by Mika Baumeister

For nearly two years, the global supply chain has been a mess to say the least.  One of the many lessons businesses and nations alike are learning is the importance of diversification amongst its sourcing partners.  Businesses who source foreign goods from a single source, or multiple sources from the same country, were exposed to massive risks once the supply chain disruptions hit.  Not only are many of these businesses looking to expand their international sourcing options, but they are also looking for more domestic options where possible. 

The problem with the latter is the substantial increase in costs that come with domestically sourced items, which can erode or eliminate any profit margin opportunity on the finished product.  Unless your business is prepared to take on that increased cost and overhaul your pricing models, this won’t be a viable option.  So, what other options are there? 

In his recent article published on Forbes, Senior Contributor Bill Conerly discusses some of the procurement strategies out there that companies can consider to reduce risk and navigate the crisis.  Some of the strategies include:

  • “Buy big” – purchasing several months of materials that make a up a small portion of the product’s final cost
  • Increasing raw materials inventory levels – a smaller version of “buy big”.
  • Order splitting – Working with multiple suppliers to fulfill orders on large purchases

Check out the full article for a more detailed look at the various strategies to see if any make sense for your business.  While there is no one-size-fits-all solution, Conerly’s suggestions can at least serve to spark brainstorming sessions within your team.