- Supplier relationship management is becoming a more data-driven process as the pandemic stifles travel, Pim Altena, global head of partnerships at freight forwarder Flexport, said on a webinar Wednesday.
- Procurement managers will have to find new ways to manage existing supplier relationships and new ones, Altena said. He gave the examples of audit-at-home and meeting suppliers through Zoom or online trade shows.
- Altena said he expects U.S.-China decoupling to continue and for businesses to reduce their China sourcing, though acknowledged that’s a difficult task. “No single country can substitute for China,” he said.
Supplier relationships may now be more important than ever to maintain a sense of stability in the face of large-scale disruption. “Cherish the ones you have,” Altena said of existing suppliers.
The nature of existing relationships will look different, though, with greater focus on remote communication, audits and quality assurances. In-person visits to suppliers are on hold for the foreseeable future. During the Flexport webinar, more than one third of attendees said they don’t anticipate being able to visit their suppliers in Asia until next June.
Before the pandemic, buyers anticipated a greater emphasis on digital skills in supplier negotiations, in part because of the growing role of technology in procurement — from video conferencing to data analytics.
Conversations may change too, with procurement managers asking questions specific to their vendors’ operational continuity or business health. Managing financial risk with suppliers ensures better financial health for the entire chain — a critical factor in current economic conditions as 45% of respondents in a McKinsey survey expect more than half of their suppliers to be in financial distress within six months.
John Beattie, principal consultant at Sungard Availability Services, suggested buyers do “a deeper dive on the business resilience capabilities of suppliers.”
He expects managers to ask questions around how long suppliers can sustain business disruption and if they are ready for the next pandemic. “Nobody really cared about that six months ago, but now there’s certainly more questions being asked” about pandemic readiness, he told Supply Chain Dive.
Procurement managers will also face the task of building relationships with suppliers in countries where they may not previously have done business, Altena said. Supply chains started to embrace diversification during the U.S.-China trade war as tariffs made imports from China more costly.
In a poll during the webinar, 47% of respondents said they plan to reduce their share of China sourcing after the pandemic, although 39% said they would keep their share of China sourcing the same.
A Thomas survey found 64% of OEMs are likely to bring sourcing back to North America following the pandemic, but other industries, namely apparel, have deep roots in Asia. Altena expected the main benefactors of continued U.S.-China decoupling to be Southeast Asian economies.
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