As with most sectors, procurement has been hit hard over the past few months as its experts try to navigate the ‘new normal’ imposed by Covid-19. Disrupted supply chains, complex logistics issues, new border controls, more competition for less bid opportunities and revised working practices are just some of the many challenges faced by procurement consultants and teams.
But it’s not all doom and gloom, as constantly reported in the media – far from it in fact. We are hearing a lot of positive stories of procurement being the hero, as organisations try to navigate these challenges.
So, let’s take a look at some of the trends we have witnessed in recent weeks:
- Increased collaboration in supply chains
By far the most striking trend we have witnessed is the increase in collaboration between suppliers and their clients. Instead of panicking and seeking alternative options to meet the changing demands of their supply chains, we are seeing clients work with their existing supply chains to renegotiate mutually beneficial win-win agreements, to seek alternative solutions to new problems and to meet changes in demand. This has meant better communication and better supplier relationship management on the part of the client – which can only lead to a stronger long-term relationship.
- Shape shifting to meet demand
We have seen some amazing examples of adaptability amongst suppliers in the past few months – from car manufacturers building ventilators, to educational bodies building face guards, fashion brands sewing scrubs and high street brands creating new lines in face coverings. With this has come some truly altruistic behaviour from larger brands; such as handing out hand sanitisers to local businesses and residents, or food parcels for NHS workers. This only goes to prove how adaptive suppliers can be when presented with a desired outcome as opposed to a perceived problem.
- Leveraging digital to increase transparency
It seems almost every day we are hearing of a new tool on the market which will help to increase transparency in supply chains and give organisations more control over their procurement processes. So why such a surge? Well, it seems that it’s taken a pandemic, which has shaken supply chains to their very core, for businesses to understand the need for tighter control over their supply chains. This control, and increased visibility, enables organisations to predict and mitigate any risk which may be coming further down the line. Over time, this will also undoubtedly result in cost savings. It may also lead to an increased understanding that supplier consolidation, or contract renegotiation through better communication, can have a considerable impact on their bottom lines.
- Embracing more flexible resources
We are seeing increased demand for flexible resources, such as consultants and interims. It may be that organisations are recognising a skills gap as they try to plan out their recovery to business as usual. Or perhaps they are embarking on a period of transformation, where they need extra resource to manage a new project. Whatever their motivations for needing flexible resource, their experiences of enforced home working practices are resulting in a shift in attitude. Whereas previously a head of procurement might limit their search for a contractor to within an x mile radius of their place of business, they are now pushing ‘location’ lower down their list of priorities. This is great news for businesses like ours who leverage sector and industry experts across the UK. It means that we are now able to offer the most experienced consultants to deliver the solution to a very specific project need – regardless of location. All hail the ‘work from anywhere’ revolution.
- Giving procurement a bigger seat at the table
There is no doubt that the role of CPO has never been more important. It’s a little sad that it seems to have taken a global pandemic to make some c-suite members realise the importance of the role of senior procurement to increase business efficiency and reduce cost but hey, it’s here now so let’s embrace it. We are hearing some truly remarkable stories of how procurement teams have sourced alternative suppliers when supply chains are worst hit, where they have worked with suppliers to adapt their offer to meet demands, or where they have renegotiated contract terms to maintain good relationships.
So, the CPO may now have a firm seat at the boardroom table, but what does this mean? How can CPOs keep abreast of disruptions, adapt to change and ultimately mitigate risk in their organisations’ supply chains?
Let’s look at how the changes post-COVID-19 will directly impact the procurement role.
The role of procurement has – at times – been seen as transactional, as a means to meet necessary compliance, adhere to governance, or cut costs.
However, it is increasingly being seen as an essential function to drive competitive advantage and help navigate the challenges businesses face in their supply chains. It is critical in ensuring resilience in the face of further disruption.
Tomorrow’s procurement team will need to be more agile and have more transparency in its supply chains. It will need to have the tools at its fingertips to ensure that it is more prepared for any disruption a second wave might cause.
We’ve all seen the briefs. The Head of IT or Finance calls a meeting with the CPO. “We need to cut costs.” Often, they are not 100% clear where the overspend is, or which suppliers are giving them value for money, they just know that there is an overspend and it needs to be clawed back from somewhere.
But what if that had played out a little differently?
What if the Head of Finance had already met with the CPO and discussed any potential risks in the supply chain? What if they had a clear procurement strategy in place which prompted them to review supplier performance and benchmark or tender work on a cyclical basis to ensure that they were constantly confident that they were receiving a ‘value for money’ proposition.
Furthermore, what if that Head of Finance, or IT for that matter, had included the CPO in the wider business strategy? And they had ensured that the CPO had understood the organisation’s corporate responsibilities and goals for the next 12 months and that his/her procurement strategy fed into that business strategy to ensure consistency and shared, common goals.
So, let’s assume that best case scenario is how the role of procurement will change in the coming months/years…
Procurement consultants and in-house heads of procurement, will be known to provide true strategic value. It will be more proactive and less responsive, and the CPO’s place will be secured at that boardroom table.
What sort of conversations will they need to be having beyond cost? What will their priorities be post COVID19? Let’s look at some of the key considerations for tomorrow’s procurement teams:
We mention this above and everyone is talking about it but what does it really mean to be more ‘agile’ in your supply chain? Supply chain agility means how fast a supply chain responds to the changes in their environment, customer preferences, competitive advantage, etc. Procurement teams will need to ask themselves how quickly and efficiently they responded to the first lockdown. Where were the vulnerabilities and how might they handle things differently if a second lockdown were to occur? What lessons have they learned and how can they ensure a more agile response in future?
Digital procurement solutions are providing organisations with access to data which would not previously have been available. In its report ‘The Future of Procurement in the Age of Digital Supply Networks’, Deloitte was quoted to say: ‘Digital procurement is the application of disruptive technologies that enable Strategic Sourcing (S2C) to become predictive, Transactional Procurement (P2P) to become automated, and Supplier Management (SM) to become proactive.’ But it’s not just about choosing the right system to increase transparency in your supply chain. This has to be integrated with the wider organisational strategy. The aim is to build a digital business environment in order to improve operations, reduce costs but – critically for CPOs – to help to predict disruption and minimise risk.
- Strategic sourcing.
Over the past decade, there has been a shift from the procurement function being seen as a one-off transactional process of requirements gathering to procure the best product or service at the best price, to being more strategic in sourcing suppliers. Strategic sourcing is very much still focused on delivering cost reductions. But its core focus is on sustaining value for money through strong supplier relationship management, Total Cost of Ownership (TCO) and finding ways to reduce costs across a category as opposed to within one specific area at one specific time.
This is twofold. With the pandemic imposing a shift in the way most businesses work (with remote working and disparate teams), we are seeing an increased need for businesses to keep their team members working closely together with new tools and process and strong communication. Externally to their own businesses, procurement professionals and procurement consultants will need to demonstrate compassion throughout their supply chains. Collaborating with suppliers to understand their own unique operational challenges and working together to mitigate any risk in the supply chain will be a key trait expected of procurement teams. Supplier relationship management (SRM) policies must continuously be revisited and – to ensure resilience and continuity – collaboration will be key. Heads of procurement should not underestimate the importance of checking in on the wellbeing of both their internal and external workforce – supporting their extended network through resources and collaborative working practices.
Tomorrow’s procurement team will be working far more closely with key business stakeholders in sustainability. Not only does sustainability play a huge part in brand perception but, as we start to recognise potential risks in international supply chains following the locking down of borders, it’s likely contingency plans will be more localised. Add to this more focus on innovation amongst suppliers to reduce costs and you can see how the goals for sustainability and procurement seem more closely linked.
So yes, it’s true that the role of CPO is changing and now have a seat at the table. But in exchange, they have never faced a bigger challenge than repairing the damage caused by disrupted supply chains, whilst adopting new working practices and attempting to maintain value across the supply chain.
Tomorrow’s procurement professional must be compassionate, collaborative, resilient, agile and act responsibly; always considering the human factor, whilst attempting to mitigate risk through increased transparency.
It’s an exciting time to be in procurement.
So, time to pull your socks up, revisit your procurement strategy and start to not only adapt to the ‘new normal’ but to embrace it, and to update working practices to maintain competitive advantage and prove that procurement has earned that seat at the table.
We asked eXceeding’s MD, Steve Rowland, what he hoped the industry could learn from Covid-19?
That’s easy: That better collaboration is the way to a healthier supply chain through:
– Embracing digital tools to increase transparency.
– Working with your suppliers to share responsibility.
– Taking advantage of flexible resources to plug a skills gap.
All of these possible collaborations can go a long way to increasing efficiency, improving relationships and mitigating risk, as well as saving considerable costs.
Our hope is that we see a shift in the primary focus from; driving suppliers to deliver the lowest cost, to collaborating and sharing risk to increase transparency and efficiency throughout supply chains.
What other changes have you witnessed as a result of Covid-19 in the procurement sector? Do you think organisations’ attitudes will change post-pandemic?