Focus on Procurement

REINISCH Right now, the focus is primarily on the availability of materials. The pressure on the procurement functions to secure their supply chains has increased enormously in recent years. Restructuring is being considered and carried out where necessary – but it's important to remember that switching strategically important suppliers is usually a highly complex affair that can involve significant costs. In addition, the cost structure must remain competitive. Although some attempts are being made to establish targeted supplier partnerships within specific global regions, we are not seeing systematic deglobalization. In addition to availability, procurement functions are currently dealing with issues such as supply chain resilience, end-to-end transparency on prices from procurement to distribution, and sustainability.

REINISCH Particularly in manufacturing industries, a rethink is taking place in certain cases. While globalization has been a very good lever for cost reduction in recent decades, high transport costs and long delivery times are now leading to additional costs that are making more regional procurement much more attractive. Procurement teams are increasingly being tasked with developing regional suppliers into strategic partners. In this context, the corresponding technical expertise and cross-functional collaboration with the development, production, and quality management functions are of fundamental importance.

REINISCH Especially against the backdrop of global supply chains, procurement functions are now facing the challenge of proactively managing suppliers, whereby the focus is on innovating and developing new approaches to ensure greater sustainability. In some cases, this is because the economic advantages achieved through global supply chains, such as low manufacturing costs in emerging and developing countries, often correlate with low standards in the area of sustainability. In this context, deglobalization can be a strategic lever for achieving sustainability goals – for example, in the framework of a regional strategy that confines procurement activities to the local region as far as possible. Above all, this stems from social aspects, such as compliance with international minimum standards, as well as ecological ones, including the reduction of CO2 emissions. 

REINISCH This task is currently the core competency in procurement, so there is no simple answer here. It starts with strategic make-or-buy decisions that determine, at an early stage, the extent to which a company will rely on external suppliers. Among larger companies that have the necessary resources, we are currently seeing increased efforts to stabilize supply chains through equity investments or joint ventures – for example in battery production for the automotive industry. Another aspect is creating transparency. To identify risks and, above all, assess their impact at an earlier stage and implement corresponding countermeasures, the procurement function must combine and use internal data to a much greater extent. This includes data from sources other than conventional procurement systems, as well as external data that is available on the market. In other words, bills of materials, production planning, sales planning, as well as internal and external supplier data, such as supply chain risk and sustainability information, must all be integrated. Supply chains need to become far more transparent to allow companies to be more proactive and less reactive. 

REINISCH The digital transformation has made a lot of data and information available in near real time. This is allowing a growing number of companies to make the switch from traditional risk management to proactive supply chain risk management. At present, this remains a highly complex undertaking. However, the effort and cost involved in gathering, consolidating, and evaluating information is decreasing. Digitalization is thus creating greater freedom to derive and implement new measures – and to evaluate their effectiveness. In any case, procurement can no longer ignore the topics of digitalization and sustainability! This will also have a positive impact on the resilience of supply chains.