CASE STUDY

PROGRAMME Bachelor of Commerce Honours in Supply Chain Management

MODULE Procurement and Supply Management

YEAR ONE $(1)$

INTAKE January $2024$

MARKS $100$

FORMATIVE ASSESSMENT $1[100$ MARKS$]$

Read the case study below and answer the questions that follow

REIMAGINING PROCUREMENT FOR THE NEXT NORMAL

The COVID$-19$ pandemic has put an enormous strain on global supply chains, at times halting manufacturing while

shutting down airports and seaports, interrupting delivery of raw materials and finished goods. At the pandemic$$s onset,

procurement departments switched to crisis$-$management mode to help companies alleviate disruptions, including sourcing

personal protective gear for employees and helping smaller suppliers manage their cash flow. Based on research and

feedback from global procurement leaders, there is a belief that companies can continue to rely on procurement to recover

from the current crisis, in much the same way that they used the function to recover from past crises. But for procurement

to lead the way, companies will want to reimagine not just what the function does but also how it operates and which new

capabilities it will need. Research analysis suggests that procurement could gain the most by focusing its strategic

initiatives in five key areas: strengthening supply$-$chain resilience, zero$-$basing the design of category value$-$creation

strategies, investing in supplier partnerships and innovation, accelerating adoption of digital and analytics, and

transforming to an agile operating model. By proactively making these changes, procurement leaders can not only counter

some of the worst effects of the crisis but can also set themselves up to prosper in the future.

Procurement has led prior crisis$-$recovery efforts

Companies have a lot to bounce back from. As of this writing, many of the world$$s largest economies were experiencing

record$-$breaking economic contractions. Yet procurement has helped companies$$ weather global crises before. According to

research, in the five years immediately following the $2008$ global financial crisis $($GFC$),$ total return to shareholders $($TRS$)$

for companies with top$-$quartile procurement capabilities was $42$ percent higher than for companies whose procurement

operations were in the bottom quartile. While procurement can again play a crucial role in recovering from a crisis, this time

procurement leaders will want to take a different approach to the function in addressing a range of new issues. In a recent

survey conducted, top Asia$-$Pacific procurement leaders pointed to a significant difference between recovery efforts after

the GFC and what$$s happening now. Then, most companies focused on strategies to recover from the financial effects of

the recession. Today, in addition to recovering profitability and finding ways to preserve cash, companies face the added

challenges of shifting supply$-$market dynamics, changing ways of working, increasingly volatile demand, and de$-$risking

their supply chain to make it less vulnerable to disruption.

When the pandemic disrupted deliveries, it highlighted the issues in a complex global supply chain. In a separate

McKinsey survey, $93$ percent of procurement and supply$-$chain leaders indicated their intention to enhance their supply

chain resilience, while $44\%$ is willing to compromise short$-$term efficiencies $$although this sort of trade$-$off can prove

avoidable in some cases. Building relationships with more diverse suppliers may help companies withstand further

disruptions in supply availability. The pandemic upended market dynamics and value pools in many industries: for

example, expanding value pools for tech companies with cloud$-$based platforms that help remote workers communicate

and collaborate, while adding pressure to commercial real$-$estate markets and the airline industry. Decades$-$old paradigms

are being upended: ever$-$increasing global sourcing now potentially giving way to regionalization of supply, and lean

inventory targets being reset in favor of higher buffer stock. The pandemic upended market dynamics and value pools in

many industries: for example, expanding value pools for tech companies with cloud$-$based platforms that help remote

workers communicate and collaborate, while adding pressure to commercial real$-$estate markets and the airline industry.

Decades$-$old paradigms are being upended: ever$-$increasing global sourcing now potentially giving way to regionalization of

supply, and lean inventory targets being reset in favor of higher buffer stock.

Work from home was becoming popular even before the pandemic. Forced social distancing accelerated the reimagining

of the workplace$$and in particular the switch to remote work$$faster than almost anyone could have predicted. As in other

departments, the shift changed how procurement operates. Team meetings, supplier site visits, negotiations, and other

face$-$to$-$face interactions that procurement professionals took for granted went virtual