Risk is something no company can eliminate entirely. But with the right preparation and enough organizational agility, you can improve your ability to sense your risk quickly and take action immediately. That’s the essence of being resilient.
As we’ve all witnessed, the past 12 months have underscored the importance of managing risk and being prepared for the unknown. To survive, companies around the world had to show exceptional agility and adaptability due to unprecedented supply chain collapses, shuttered production lines, workforces stuck at home, and highly volatile demand.
Procurement organizations, including Accenture’s, were on the front line as many of these challenges started to unfold in early 2020. With so many business processes and facilities ultimately dependent on suppliers, just keeping the lights on required having a procurement team able to adapt to rapidly changing supplier circumstances while simultaneously accommodating a whole range of new business and health and safety requirements.
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There is a real need to understand and increase procurement preparedness, resilience, and ability to manage future risks.
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Cleaning services and supplies are a great example, not only of the challenge procurement faced this year, but also of the way supply risks can emerge seemingly from nowhere. It’s fair to say, unless your business already had very specific sanitation or hygiene requirements, cleaning would not have been top of your supply risk register at the start of the pandemic.
But look where we are now—nearly every organization in the world is reliant on its cleaning processes to keep facilities open. Cleaning schedules and frequencies had to be radically revised. Staff had to be trained in new, higher cleaning standards and guidelines. Additional cleaning supplies (disinfectant, sanitizer, equipment, etc.) have had to be sourced.
Even if your facilities are sanitized in line with new protocols, you cannot bring employees back until you provide the necessary Personal Protective Equipment (PPE). The challenges companies faced sourcing PPE throughout the pandemic have been well documented, with skyrocketing demand for face masks and visors in particular.
Indeed, the scale of the PPE supply crunch early in the pandemic is why Accenture collaborated with Avanade and Microsoft to stand up Critical Supply Connect. This is an innovative digital supply chain community connecting more than 630 hospitals with more than 100 suppliers offering over 300 unique PPE products, which has since been opened up to other industries outside of healthcare. With so many new suppliers entering the market, it was a way to rapidly connect supply with demand, while ensuring safeguards against the risk of inferior products and price gouging.
Stress testing procurement resilience
Despite all the great work procurement teams did this year, the pandemic showed just how ill- prepared many organizations were for external shocks in their supply chains, especially low-probability, high-impact events like a pandemic. Therefore, there is a real need to understand and increase procurement preparedness, resilience, and ability to manage future risks.
The ‘procurement stress test’ is an innovative risk management methodology that Accenture developed in conjunction with our Procurement Plus 360 Partnerships Team for assessing the preparedness of our own procurement organization.
By testing our procurement performance under a range of different scenarios and input parameters, we were able to identify gaps in our ability to preserve the critical activities that enable our business to keep growing, keep generating revenue, and keep managing costs.
For each scenario we devised a risk mitigation plan that outlined what the business would need to do (and when), who would be involved (and how), and which tools would be used should different supply shock scenarios hit.
To be comprehensive, it was essential that the stress tests cover internal and external shocks. So the scenarios ranged from major events like a natural disaster impacting critical suppliers and inhibiting the flow of materials, goods and services through the supply chain right through to smaller-scale (but still highly disruptive) events like a data center fire.
The value of being prepared
What did we gain from stress testing procurement? First and foremost, we are now better prepared as an organization. We have proactively devised a series of action plans for a range of different supply shock scenarios. That means, should the worst happen, we have a predefined plan ready to implement, which will dramatically increase the speed and coordination of our response.
We believe these predefined plans will enable us to bypass up to 90% of the post-event planning that would otherwise be required. In the high-stress, high-uncertainty, aftermath of a disruptive event, predefined plans will significantly increase the speed of decision making, and the quality of those decisions.
The value and proof of the stress tests can be seen in the way our procurement function ensured business continuity during the pandemic. As one of the largest organizations in the world, with a global footprint to match, Accenture was potentially exposed to significant supply risks and challenges, but our preparedness enabled our team to respond effectively and quickly.
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Predefined plans will enable us to bypass up to 90% of the post-event planning that would otherwise be required.
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We were able to move quickly and enable 100% of critical shared services colleagues to work from home in the midst of global lockdowns when our employees couldn’t go to their desks to perform their jobs and keep Accenture running. Our team procured thousands of laptops and hardware and used courier services to deliver them to our people quickly, avoiding disruption to Accenture’s business. We adjusted or extended payment terms with thousands of suppliers and sourced 300,000 items of PPE (masks, sanitizer, gloves, foot coverings, etc) for China alone. We also leveraged our global footprint to purchase masks from China and India to deliver to Japan and other regions that were short on supply.
Additionally, the benefits of a resilient procurement function flow through to the rest of the organization. Cost control and competitiveness can be sustained. Supplies critical to the organization’s ability to generate revenue can be maintained. And, when you can prove you’ve enhanced your ability to manage risk and maintain operations, customer trust can even be enhanced.
We think the procurement stress tests are a highly valuable exercise that every organization should go through. If you’d like to discuss how it could be applied to your business, please don’t hesitate to get in touch with me (firstname.lastname@example.org), or with my colleagues Marius Weigert (email@example.com) and Daniel Kohlmann (firstname.lastname@example.org).