Question

Kindly provide a significant answer to the below.

SECTION A [40 Marks Read the case study below and answer ALL the questions that follow.

HOW TO SUCCEED IN PROCUREMENT

IN 2022 The Covid-19 pandemic, and the ensuing commodity price disruptions and shortages, have forever altered the world of procurement. In 2022, many businesses will continue to grapple with heavily disrupted supply markets and continuity challenges, temporary and permanent shifts in consumption patterns, a new emphasis on cash and risk management, and changing input costs. Amid this chaos, procurement teams will also play an intrinsic role as companies revisit their policies and programs to address diversity and inclusion. If they haven’t already, they will need to push supplier diversity to the top of the procurement agenda this year. They will also need to answer the call for sustainability by emphasizing sustainable sourcing and environmentally responsible supply chains. In this environment, there are few quick hits remaining to rapidly improve the P&L. Instead, most organizations are merely trying to navigate price disruptions and shortages across strategic categories. Procurement leaders’ focus is swiftly shifting from cost savings to a more complex set of goals: improving supply chain risk mitigation and resiliency; strengthening relationships with strategic supply base partners; increasing transparency; supporting nearshoring initiatives while aggressively pursuing savings; and more. Traditional playbooks focused on reducing costs through sourcing programs that emphasized "buying better" strategies. That won’t be enough in 2022. Leaders will need to broaden their toolkit, finding ways to capture value and strengthen operational resiliency, given the anticipated headwinds. This year’s continued supply chain challenges will be coupled with increased demand across all industries. And enduring labour shortages and climbing labour costs throughout the value chain will only compound the issue (see Figure 1). Direct material indices are rising, and suppliers are quick to react. These factors are inflating costs across the board—and procurement departments will have to pay up to ensure they meet customer demand.

Many suppliers are passing these material increases on to their customers. But some suppliers are also using rising prices as a chance to increase prices more broadly. This puts more onus on buyers to understand the magnitude of increases, the reasons behind them, and the measures they can take to claw back some of those increases once inflation abates. In the next year, a balanced perspective on metrics—ones that look at operational agility and supply base resiliency, then cost savings—will distinguish the procurement leaders from the laggards. To succeed, procurement teams will need to strategically seize hidden opportunities with suppliers, by using a more sophisticated toolkit and partnerships with stakeholders around the business. The best procurement teams will change the lens through which they view the elements of their value chain. While suppliers and customers will continue to play their traditional roles, winning teams will also start to see them as strategic partners. For instance, as teams employ value engineering, they will have to develop solutions with customers that meet qualifications and design specs. Concurrently, they will need to collaborate with suppliers to determine if they can implement substitute materials or alternate formulations. Of course, assuming there are opportunities, multidimensional negotiations will be necessary to divide value across these different partners.

Answer ALL the questions in this section.

QUESTION 1 1.1

With reference to the case study provided and using any relevant examples, critically discuss the issues that have altered the procurement function in 2022 and review their impact on organisations.

Answer 1

In 2022, the procurement function has been significantly impacted by several key issues, primarily driven by the Covid-19 pandemic and its aftermath. These issues have brought about changes in the procurement landscape, and their impact on organizations is far-reaching. Let's critically discuss some of the key issues that have altered the procurement function and their effects on businesses:

Disrupted Supply Markets and Continuity Challenges: The Covid-19 pandemic led to widespread disruptions in supply chains worldwide. Lockdowns, travel restrictions, and labor shortages disrupted manufacturing and distribution, causing delays and shortages of essential goods and materials. Organizations faced challenges in maintaining business continuity and ensuring a stable supply of products and services.

Shifting Consumption Patterns: The pandemic also brought about changes in consumer behavior and demand patterns. With remote work, e-commerce, and safety concerns, there were shifts in the types of products and services in demand. Procurement teams had to adapt quickly to meet changing consumer preferences and anticipate future trends.

Cash and Risk Management Emphasis: The uncertain economic environment and supply chain disruptions forced organizations to prioritize cash flow and risk management. Procurement teams had to balance cost savings with ensuring the financial stability and resilience of the supply chain. Risk assessments and contingency planning became critical elements of procurement strategies.

Supplier Diversity and Sustainability: There has been a growing emphasis on diversity and inclusion in procurement. Companies are increasingly focusing on supplier diversity, encouraging the inclusion of minority-owned and women-owned businesses in their supply chains. Additionally, sustainability and environmentally responsible sourcing have become crucial factors in supplier selection.

Supply Chain Risk Mitigation and Resiliency: With the experience of supply chain disruptions during the pandemic, organizations recognized the importance of building resilience. Procurement leaders shifted their focus from purely cost savings to strategies that mitigate risks and enhance supply chain resiliency.

Rising Input Costs and Inflation: Global supply chain disruptions and increased demand have led to rising input costs. Suppliers are passing these cost increases on to customers, leading to inflationary pressures. Procurement departments are facing the challenge of managing these cost increases and negotiating with suppliers effectively.

Strategic Supplier Partnerships: Procurement teams are redefining their relationships with suppliers and customers. Instead of solely focusing on cost reduction, they are seeking strategic partnerships. Collaborative approaches, such as value engineering and joint problem-solving, are being used to drive innovation and create mutually beneficial solutions.

The impact of these issues on organizations varies depending on their industry, supply chain complexity, and geographic presence. For some organizations, the disruptions have exposed vulnerabilities in their supply chains and highlighted the need for better risk management. Others have seized the opportunity to innovate and build stronger relationships with suppliers and customers. Overall, the procurement function in 2022 requires a more agile and strategic approach to navigate the challenges and leverage opportunities for growth and sustainability.