Procurement & KPIs: The Risk Of Putting All Eggs In One Basket
The current Coronavirus crisis should be a wake-up call for Supply Chain and Procurement professionals!
Almost a year ago, I wrote about the side effects that poorly designed KPIs could have:
And, I have also written numerous articles about the need for Procurement to look beyond just cost savings; here is one of the latest one:
The unfolding Coronavirus crisis and its impact on supply chains is a “perfect” illustration of the combined effect described in these stories.
As stated in one of the articles above, buying decisions, at home or at work, shape supply chains, and, therefore, the world. It is why it is crucial to consider the criteria driving to these decisions with that in mind and not just short terms objectives.
Years of price-based decisions and the drive for low-cost country (LCC) sourcing have left their marks. Many organizations have had for years, and many still have LCC-related KPIs, encouraging sourcing from these areas. In addition to the impact on work displacement, an obvious consequence is that China is now the factory of the world and, therefore, the Achille’s heel of most supply chains.
In addition, and making the above ever worse, old tactics like volume aggregation have created even more dependencies and bottlenecks by making single-source sourcing a default.
So, the current crisis may be a wake-up call for many supply chain and Procurement professionals or a wake-up call for companies making them look at Procurement and supply chain with a different eye.
Old strategies applied blindly and short-termism have a considerable cost. And, they do not fit in today’s world characterized by volatility, uncertainty, complexity, and ambiguity (VUCA).
The crisis related to the Coronavirus is, sadly, one of the most recent reminders that everything has a price. But, it is also an opportunity to learn from past mistakes to put in place the right governance and systems.
Isn’t it?
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