How Sourcing has Reemerged in a Covid-19 World
Posted by Tim Johnson, JAGGAER Strategic Account Executive – Manufacturing, Life Sciences, and Transportation in COVID-19 / Sourcing on August 12, 2020
For the first three months after Covid-19 hit, virtually every sourcing project, in every sector, was put on hold while companies tried to assess the situation and how best to deal with the epidemic. Only a few, notably grocery stores, food chains, essential retailers, and healthcare, were in a position to push forward. Sourcing was in chaos and a topic that concerned many customers was that they were pushing back transportation tenders – and especially any planned mega–bids – while they waited to see how the market would develop. In recent weeks, all that has changed, and organizations are firing up transportation and mega-bids.
Companies are starting to reengage with key suppliers in an effort to reevaluate sourcing strategies and how to approach the very uncertain future in this new Covid-19 environment.
Now more than ever they are asking:
- Where are our materials coming from?
- Where are our suppliers based?
- How do we increase points of origin and expand supplier diversity?
- Plus the eternal question, “What if …”
Diversify Your Sourcing Needs
Questions they may not have considered in any great depth for years but are now the becoming the cornerstone of any comprehensive sourcing strategy. Many of our customers were especially concerned when they discovered the geographical location of their suppliers and points of origin; to nobody’s great surprise, these were concentrated in Asian regions.
Thus, customers have been specifically asking JAGGAER about how to leverage our platform to diversify points of origin and more generally to support their supplier diversification efforts. For example, if they discover that 80% of a key material or component is coming from one particular country or region in Asia, they are asking, how can we identify alternative sources of supply in Africa, Latin America or another region? And this applies not just to first tier suppliers, but to 2nd and 3rd tier suppliers as the extended supply chain at large is coming into greater focus. In many cases, this analysis has revealed that even if the first tier is geographically diverse, the materials or components originate with just a handful of n-tier suppliers; the funnel narrows as you proceed through the tiers, and this is a something many organizations have been working hard to correct as Covid-19 has given risk mitigation increased importance along with the need to identify cost savings within the supply chain.
Shifting Focus to Create Opportunity
Another big shift that we have noticed is that our customers are broadening the scope of the categories that they are running through JAGGAER tools, maximizing the value that they get out of our solutions. That applies even if their main categories – for example, transportation – are still quiet. A good example is Exide, the multinational lead-acid batteries manufacturing company. Even though its transportation bid had been on hold for several months, after Exide was acquired by the Rajan Raheja Group it was in touch not only to say that the bid was back on the agenda, but also asking how to leverage JAGGAER for other categories including MRO, facilities services, packaging, warehouse, direct and indirect materials.
Another valued and longstanding customer, Wendy’s Quality Supply Chain Co-op (QSCC), which supplies the Wendy’s quick-service restaurant chain and has nearly $4 billion in buying power, has had to reorient its business. Most Wendy’s outlets were closed for dining in, but the drive-through business saw a significant uptick. The effect was an increase in the volume of direct materials and warehousing being sourced through JAGGAER to cope with the dual effect of reduced in-restaurant sales and increased mobile ordering. And of course, with the massive shift from in-store to online retail, warehouse space was (and continues to be) at a premium. Within transportation, in the first few months of the pandemic there was also a shift from mega–bids to a larger number of spot bids from fewer suppliers, though with more states and countries allowing restaurants to reopen (albeit at reduced capacity, with social distancing), the situation is beginning to stabilize somewhat.
Driving Value with JAGGAER
The unprecedented unpredictability of the situation caused by Covid-19 and its ripple effects has meant that companies as different as Exide and Wendy’s QSCC, are viewing the data derived from their demand forecasting analytics software combined with market indices more critically than ever to form cogent go-forward sourcing strategies. Considering the scale of the challenge, companies have adjusted remarkably quickly, developing completely new sourcing strategies for mitigating risk and addressing new patterns of demand.
The three big takeaways from all this are first, that JAGGAER offers the flexibility and ease of use that companies need to cope with this situation of fluctuating demand, second, the JAGGAER technology and expertise that companies have relied on for certain specific categories in the past can easily be applied to others, and third, our customers are really taking advantage of the tremendous support they get from our supply chain experts, which I believe is unique in the source-to-pay market. In short, customers are making more strategic use of the tools, taking advantage of the integrations with third-party software suites and getting more value than ever before from JAGGAER in these difficult times.