The World Economic Forum is many things: an annual meeting of business leaders in Davos, Switzerland; a sponsor of think tanks like the Centre for the New Economy and Society; a funder of social enterprises such as the Forum of Young Global Leaders; and the publisher of Agenda articles on contemporary business issues by leaders in business, politics, and civil society.
Resilinc CEO Bindiya Vakil recently contributed a WEF Agenda article in which she urges procurement and supply chain managers to adopt a new mindset as they seek to build more resilient supply chains in the aftermath of the pandemic.
Bindiya explains how legacy procurement strategies, in which OEMs prioritize cost reductions from their largest suppliers by spend, have resulted in crushing losses of revenue and profits. “The inability to get a $5 semiconductor chip has brought the automotive industry to its knees,” she wrote. Shortages of cardboard containers and generic parts costing less than 30 cents have halted assembly lines for weeks.
These problems in supply chains are not new. But, after the supply chain crises of the last two-and-a-half years, procurement leaders have an unprecedented opportunity to gain upper management support for shifting to a revenue-driven approach to supply chain management. “Revenue impact needs to be the new way to segment and define critical suppliers,” writes Bindiya.
To drive this change, new metrics and KPIs must be instituted that reward procurement teams for protecting the continuity of supply, especially for high-revenue products. Supplier relationship managers should require more transparency from suppliers in exchange for more favorable pricing, future business, and enhanced status in the OEM’s procurement programs. Both suppliers and their OEM customers “can identify areas of investment the supplier needs to … ensure continuity of supply—and what the manufacturer will provide in exchange.”
A robust, multi-tier supply chain mapping initiative must guide this shift in strategy, providing the up-to-date supply chain intel that enables revenue-focused risk mitigation and supplier collaboration, Bindiya writes. While Bindiya and the entire Resilinc team frequently advocate these themes and messages, it’s nonetheless validating to see them published in the World Economic Forum’s Agenda.
Read the full article: Resilient supply chains: Why every supplier counts