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Major Considerations for Mitigating Procurement Crisis

The primary role of procurement is to acquire goods and services from external sources and ensure the continuity of supply to the organisation. As there is a lot of uncertainty for many businesses, which can happen at any moment and from anywhere. Procurement teams need to stay aware of trends and risks facing the company or the suppliers. Besides, establishing a strong procurement strategy and relying on a set of proactive and reactive techniques can help the procurement team to mitigate the procurement risks, reduce the risk of supply chain disruption and be well prepared to handle the procurement crisis.

Maintaining Alternate Sources Of Supply 

Sourcing or manufacturing everything from a single supplier or one location for critical parts in the business creates serious risk. An organisation might such as product failure, supplier business closure, disasters like earthquake, large-scale outbreaks of infectious disease, electrical, fire, etc. As a result, there will be a shortage and delay in raw materials and finished goods, delay in projects, experiencing cost overrun and the organisation might lose the customers. Therefore, procurement team needs to take action to the immediate change to minimize the risk of disruption. For example, reduce reliance on any single country such as China, Vietnam, source for alternative supply and develop in-house sourcing and delivery options. Besides, alternate sourcing help to reduce inventory cost and assures part availability at optimum levels.

Understanding the Nature of Political Risks

Political risk is unavoidable in the global marketplace, it can be divided into four levels, which is geopolitical, country-level, regulatory and societal. Geopolitical risk is the biggest political risk faced by the organisations. Ongoing research, identify, analyse and collect the current quantitative political risk indicators is the most important political risk mitigation strategy in any emerging market. The coordination and involvement between the key external stakeholders such as customers, suppliers and creditors may help the organization to recover faster from an adverse political event. Besides, organisations can conduct briefing with the key external stakeholders to discuss about the unexpected political risk contingency plan. The procurement team should consider diversifying the overseas investment instead of focusing on just one or two emerging markets. Organisations that are proactive in their political risk management would minimise the impact of political risk and prevent the consequences.

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Jessline Piong Li Chai, DPSM
Jessline Piong Li Chai, DPSM
Jessline Piong Li Chai has substantive years of experience in the construction industry, and is now specializing in the field of procurement. She holds a Diploma in Commerce, majoring in Human Resource Management and is a member of Singapore Institute of Purchasing and Materials Management (SIPMM). Jessline completed the Diploma in Procurement and Supply Management (DPSM) on September 2021 at SIPMM Institute.

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