The Covid-19 pandemic has made clear something that we’ve known for a while: Efficiency alone does not make for good strategy. The pandemic and the financial crisis of 2008 demonstrated the potentially catastrophic dangers of just-in-time strategy—and have highlighted the need for one that might better be called just-in-case, which puts much more of an emphasis on resilience. That’s only going to become more important now that the public sector owns so much debt in private firms. So how can companies most effectively make this switch? By thinking of procurement in ways that involve a focus on creating resilient multi-relational networks rather than linear supply chains. This kind of thinking, in fact, can lead to procurement’s actually becoming strategy.
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For decades, we’ve placed efficiency at the center of strategy: We’ve run operations as close to full capacity as we can. We’ve ordered from suppliers in ways that are tightly aligned with our production schedules. We’ve worked hard to minimize costs, “sweating assets hard” under the guidance of the CFO, and we’ve delivered financial returns on a quarterly basis. In many ways, this is a system that has worked remarkably well. But as the COVID-19 pandemic has made painfully clear, it has a major flaw: It doesn’t help firms develop resilience.
