Rough Seas Ahead For Procurement

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As always, every challenge comes with an opportunity to make an impact. 2019 brings with it exciting times and it would be interesting to wait and watch how the world reacts to these rough seas!!

If you think 2018 was one of the most challenging years ever, hold your thoughts for a while!! The advent of 2019 might break that benchmark just set.

With the Chinese government tightening the grip on several small and medium scale enterprises across the eastern coastline of China, business saw a tremendous turmoil. This VUCA environment sent the prices swirling northwards and the availabilities as well became a challenge. The effects were global and pan-industry. Although a similar situation was encountered during the Beijing Olympic way back in 2008, most organizations did not learn from that and the market was not ready for this shock. For certain industries like the pharmaceuticals, the input material contributions went up by 3 to 5% and this put immense pressure on the profitability in an already fiercely competitive scenario.

While 2019 will see several favorable scenarios, still there are rough seas ahead..

As per an article on:

ichttps://www.icis.com/explore/resources/news/2018/10/04/10263657/china-relaxes-environmental-rules-as-trade-war-bites/is.com

China is taking the following measures to ease off the damaging trade war:

– Lower overall targets for particulates in key urban areas

– Local authorities, not central government, to enforce measures

– Relaxed rules on coal could boost the availability of gas for chemicals

However, several small & medium scale units that were closed down are expected to take some time before they open up OR some of them may not open at all.

Secondly, The US dollar has significantly strengthened over the last six months over the Chinese Yuan, and this has a positive impact on the revenues of the Chinese exporters with regards to the local currency.

Last, but not the least, several facilitations on foreign trade policies have been undertaken which will result in a favorable trade.

As per a recent article on:

https://www.bloomberg.com/news/articles/2018-12-24/china-cuts-tariffs-on-more-than-700-goods-amid-open-trade-drive

There have been multiple rounds of tariff cuts on both imports and exports of goods from China.

These factors may infuse some stability and while the volatility in pricing may come down, availability will still continue to remain under pressure.

A cascading impact of the VUCA environment is talent portability. With the market factors fiercely digging deep holes in the pockets of organizations, procurement has emerged as a highly strategic function. The organizations who have the ability and the talent to convert the VUCA challenges into opportunities will thrive. Therefore, there is a rising demand for agile & smart transformational procurement professionals who can navigate thru these challenges and give their organizations a game-changing competitive edge.

As always, every challenge comes with an opportunity to make an impact. 2019 brings with it exciting times and it would be interesting to wait and watch how the world reacts to these rough seas!!

“Views expressed are those of the author/the author’s personal views and not of the company”

 

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