How will the role of Procurement change post COVID19?
Much of the content you read surrounding the procurement function at the moment paints the picture that, quite rightly, CPOs will be given a bigger seat at the table post-COVID19.
The role of procurement has – at times – been seen as a means to meet necessary compliance, transactional, adhere to governance, or cut costs. However it is increasingly being seen as an essential function to drive competitive advantages and help navigate the challenges businesses face in their supply chains, as well as ensuring resilience in the face of further disruption.
Tomorrow’s procurement team will need to be more agile, have more transparency in its supply chains and 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:
Agility - Everyone is talking about this 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?
Digitalisation - Digital procurement solutions are providing organisations with access to data which would not previously have been available. 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.’ In its report ‘The Future of Procurement in the Age of Digital Supply Networks’
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 minimize 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.
Collaboration - 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.
Sustainability - 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, its 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 their seat at the table is most likely reserved. 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.