Category management and risk advice from a Ukrainian procurement leader

As the war in Ukraine enters its fourth week, as people, towns and infrastructure continue to come under attack and we witness a new humanitarian crisis across Europe, our first thoughts go to the people of Ukraine (and the citizens of Russia who take no part in these tragic events). Our second thoughts turn to how we as procurement people can help in some way.

(Read what our CEO Jason Busch and Chief Research Analyst Pierre Mitchell said in February.)

Businesses in Ukraine, and the many facets of stakeholder and the supply chain that feed into them, also feel the effects of this destruction, which will eventually impact the whole world. We were fortunate to connect with someone who can help us make sense of how procurement people can navigate the waves of disruption and perhaps even help formulate a plan to help.

Maryna Trepova is CEO at IPSM, a Ukraine-based procurement and supply management consultancy and training organization; she is also Head of CIPS Programs in Ukraine. A Kyiv-based procurement professional, consultant, trainer, speaker and published author, she speaks to us from Bucharest, where she now finds herself and her family (at time of writing).

With 15+ years of experience in training procurement departments to optimize their processes, and costs, we sought her advice for practitioners dealing with the current supply chain crisis. We ask her what category managers and global sourcing teams should be focusing on as lack of access to Ukrainian and Russian commodities deepens and shapes global markets.

Category management strategies in times of crisis

“In this drastic situation,” she says, “we are faced with supply chain disruption and lack of access to many products, ingredients, materials and so on. Prior to the invasion, and even prior to Covid, I wrote a paper on how to protect your supply chain in times of crisis. And I would say the number-one need is to develop a risk plan, laying out your alternative plan b and plan c, etc. I am talking from a Ukraine viewpoint, but actually all category managers, everywhere, should have alternative sources and alternative logistics.

“Ukraine produces a lot of raw materials, from natural gas to corn and wheat, and we export to many countries. So now, those countries are suffering from the limited supply of these products. Category managers have to manage this situation by searching for other sources where possible; if they didn’t have alternatives in place before the war, they may think it’s already too late — but they should still develop their strategies now.

“The next most important part of managing supplies and categories during these difficult times, is to focus on your relationships, especially through SRM strategy and development. Category managers need to take concrete actions and be very precise with their key suppliers. This means staying in contact with them absolutely all the time so they can understand how they can best diversify their sources and really consider the role of each supplier in the organization’s sourcing strategy.

“It’s also important for category managers to look at the cultural mix of strategic suppliers, identify who and where their bottleneck suppliers are, and develop a plan, because if you are very dependent on them your company will be at risk.

“So the key areas of focus are risk management, supplier relationship management and diversification of supply chain and logistics, like warehousing and freight, and calculate the risks.”

Staying in the vein of risk, we asked Maryna about the importance of considering geo-political risk when formulating category strategies, and whether category managers understand the importance of doing so.

The importance of geo-political risk in category strategies

“In Ukraine,” she tells us, “category managers are very aware of the importance of calculating geo-political risk, and commonly take it into account, because of course we have experience of war with the 2014 invasion of eastern Ukraine and Crimea. But geo-political risk is something that all category managers should consider in their strategies, and, importantly, research it well.

“When I provide training to category mangers, I always include market research and the use of tools as part of that training to get a deep understanding of the main factors that will influence their strategies. When it comes to external factors, we need to take into account all potential influencers and potential risks, predict how a market will develop, and calculate how it will affect our actions.

“This is a big part of a category manager’s job. And they need to do this, not once every three years, but on an ongoing basis, because geopolitical factors are constantly changing and strategies need to be updated as often as the climate dictates. These factors, like what we are experiencing now, will have a dramatic effect for years — not months — to come.

“We are entering a period of huge change — what happens now in Ukraine will have an influence on the whole world. And what will happen with Russia will drive a huge wave into their economy that will affect the whole world in the next few years, and as procurement people, we need to understand how it will influence our categories and our markets.

“Some markets and some production will change dramatically. And that’s why I recommend really getting to grips with the Five Forces of Porter, to understand how you can protect your supply, your strategy and your supply chain. Look for the new sources of supply, look for the new tech on the market that you may not have known about, look for new players, new vendors — it’s important to keep up to date.”

The need for agility

While coronavirus forced us to pay more attention to our local markets, Ukraine is now facing the opposite situation. “Sourcing locally is a good thing,” says Maryna, “but at the moment we have to find the balance between local market approaches and worldwide approaches and be able to swiftly switch. For example, with what is happening now in Ukraine, Ukrainians mostly cannot use their local markets because the infrastructure has been destroyed, although some factories continue to operate and provide goods and materials. But in the most part, we need to source those goods and raw materials from other countries.

“I know that some of my clients have changed their procurement strategies and have turned to Poland, to Hungary, to Bulgaria, to Romania, among others, for substitute sources of supply. It’s important to remember that you just cannot expect to work withing the frameworks you had before. You need to be open-minded, see all possibilities and have the flexibility to change your strategy.”

How can procurement organizations help Ukraine now?

“Right now in Ukraine, colleagues and people I know from procurement and supply are directly helping local authorities with the supply of necessary equipment, because they are in need of many provisions.

“Of late, I personally have been concentrating on the needs of my family first. But now that we are safe, I am collecting my thoughts around how procurement can help. I am formulating an idea of centralized procurement centers, or centralized voluntary organizations, that have connections with procurement departments worldwide. Especially with people who have experience of, or connections with, producers of military and other equipment, and clothes.

“It would be so useful to build a network that can help search for clothing and other provisions, and help organize a supply chain that can deliver as far as the western Ukrainian border. Once there, we can organize the logistics via supply chain managers to distribute it to the parts of Ukraine that need it the most.

“It’s one idea — and while my skill-set doesn’t lie in organizing a worldwide procurement community, I can be the bridge for process and organization. Any ideas and responses from readers would be very welcome to help make this happen — to launch a global strategy for mobilizing supplies to the Ukrainian border, through procurement people to help the Ukrainian people.”

Maryna’s volunteer colleagues have created a portal that you can access to help in whichever way you can — please visit:

The Humanitarian Coordination Platform

—

Spend Matters thanks Maryna Trepova for this candid conversation. Members of the Ukrainian tech community, of which Maryna is part, have come together to help their country in this time of need. They are fundraising to provide essential supplies to the Ukrainian people.If you would like to help their efforts, there is a list of both general and specific contributions you can make, from donations, to helping displaced Ukrainians find work, to sharing the message on social channels — find that here.