It isn’t yet clear how much of a threat the new Omicron variant poses to the world’s recovery from the Covid-19 pandemic. But what is clear is this is the biggest variant scare we’ve had since the global vaccination program began to turn the tide of the pandemic.
Every procurement leader should be alert to the danger. We all hope that vaccines will continue to be effective against this variant, but we must start preparing for the possibility they may not – and ensure that our businesses are ready for any disruption that would result from that.
There are three steps we recommend all procurement teams take at this stage to prepare for Omicron:
- Keep a close eye on supply and demand
- Get your business disruption ready
- Have a plan to tackle costs
Keeping a close eye on supply and demand
Lockdown is a word that sends a chill down the spine of every business leader. We’ve already seen this happen in countries like Austria and the Netherlands, and the danger is a vaccine-resistant variant sends further parts of the world back into lockdown.
All procurement leaders will be watching for news on this front, but it is also key to ensure you have the data on your supply and demand to pick up any changes in behavior. For example, are border closures causing snags in your supply chain? Or is the fear of Omicron already causing people to make changes in their behavior?
Ensuring you are on top of your data will give you the ability to act early and respond to any changes that may be taking place. Ideally, you want to be ahead of the news cycle – not finding out what’s happening once everybody else is scrambling to adjust.
Getting your business disruption ready
Whatever happens with Omicron there has always been the possibility a vaccine-resistant strain of Covid-19 could emerge. Or indeed at any moment, there could be a major natural disaster that impacts your supply chain and wider business.
It is the responsibility of procurement leaders to ensure they are ready for whatever disruption comes the way of their business. Every business that has stock should be interrogating whether they have enough to get them through a period of major disruption, should one occur as it did in Spring 2020 when global lockdowns spread across the world. There is of course a counter position, which is not landing yourself with too much stock if customer spending patterns are to shift again. Experience plays well here, as does data, again.
Around the world, we have seen government react differently to outbreaks, notable lockdowns in Chinese ports. Businesses like Amazon and Asda, to name but two, have already signaled their intent to take some level of control of their shipping to create some level of predictability, businesses like Peloton did the same earlier in the year.
Whether it is shortages, power outs, or Omicron, if you’re a business that doesn’t have stock the question is similar, do you have the people, plan, and processes in place to deal with major disruption?
Having a plan to tackle costs
Procurement is often about preparing for the worst-case scenario. Procurement leaders should be thinking through what levers they would pull if demand did stutter as a result of Omicron. In this scenario, they would be a need to manage costs down in an effective and efficient manner while also ensuring business continuity. Every CPO should have in their top drawer a plan for how they would achieve this; what’s variable, what’s not, and how each £ or $ is contributing to the health of the business in growth or in crisis.
But as well as cost reduction – how would you dial up the support you needed from certain suppliers in a worst-case scenario? To give just one example – if you’re a retailer, what suppliers would you need additional support from if your physical business had to close tomorrow?
This is a conversation none of us really want to be having. We all wish we were focusing on the upcoming Holiday season. But it’s important to go into it with our eyes open. If there is to be a nightmare before Christmas then it’s better to be prepared than find yourself blindsided as events spiral out of control.
If you’re looking for support in responding to potential disruption caused by the Omicron variant then please get in touch.