Procurement post COVID-19
With organizations now approaching the new normal, COVID continues to provide significant challenges and opportunities for global supply chain chains, forcing procurement teams into the spotlight. COVID-19 is forcing the world into a new reality, many organizations are also having to rethink what practices will become permanent and the changes required to maintain operational resilience.
Angharad Kenward Investigo, Thibault Lecat INVERTO, Lance Younger INVERTO, and Alex Jennings DS Smith and Phil Thomas Barclays recently led an exciting panel debate and open discussion. Angharad chaired the discussion covering procurement hot topics:
- How will COVID impact recruitment?
- What changes will there be on the supply chain?
- How do you balance social interaction reduction with innovation?
- What will procurement’s role be post-COVID?
- How can supplier due diligence and information be real-time and forward-looking?
- How does procurement manage cost out versus making suppliers bankrupt?
- What changes will be permanent – working from home, shorter RFP cycle times?
Thriving within new working models
Today’s new way of working has forced a rapid change. Organizations have had no choice but to adapt to a new and intensive form of working, which has impacted the speed and productivity of work. During the debate, nearly all agreed technology has helped to dismiss certain beliefs around the inability to work from home to ensure business continuity. ‘We’re in a ‘Human Energy Crisis’ – looking at increased speed, capacity and workload with less people and we’ll need to maintain that capability’ Lance Younger Managing Director INVERTO.
With organizations such as Twitter allowing employees to work from home forever, this has also prompted organizations to review their structures and assess individual roles to determine if specific jobs can be done from home and provide the necessary infrastructure to enable this. For example, in the Financial Services sector, it was essential to review third party systems to ensure alignment with a risk assessment to enable working from home securely.
There are now also fewer constraints to building teams based on geographies which could help encourage the diversity and inclusion agenda in procurement.At the heart of the crisis, procurement and procurement leaders have put people first, aiming to ensure the safety and well-being of their teams and supply chains first.
Maximizing and Capturing value through Digitalization:
According to INVERTOs COVID survey, we identified that 86% of companies were in the middle of a digital transformation in procurement pre-COVID. However, the impact of COVID hasn’t changed this course but accelerated this.
With Digitalization, operational procurement is now able to encourage business continuity thanks to several digital enablers with COVID helping to accelerate this. For example, the use of virtual negotiations or the reduced need for travel to meet with suppliers. However, it’s important to note that as digitalization helps to enable the implementation process, human interactions towards building relationships with stakeholders are still vital to understanding each other. ‘Technology is an enabler to digital change but it’s not the end game. It’s critical to understand the human element in building relationships with buyers and suppliers’ – Phil Thomas Barclays.
Innovation and Value creation through deeper Supplier Collaboration
Organizations recognized that accelerating supplier collaboration and innovation is essential in the new normal to enable value creation. Segmenting and identifying key suppliers critical to operations and proactively engaging with them is a crucial tactic. ‘Organizations are looking at innovation & collaboration to slim down where possible to get ready for the steep uptake in demand in H2 and to innovate quicker’ Thibault Lecat, Managing Director INVERTO
For example, in the Packaging industry, Planning and Logistics modeling was identified as a challenge due to significant switches in demand from customers across different locations and closures of borders or shortage of drivers. The key to surviving was ensuring dialogue and collaboration between suppliers, customers, and teams. Also, responding to quick shifting changes in demand by accelerating supplier innovation and testing new opportunities.
Weathering Future events through deeper Supply Chain Resilience
Organizations are now drilling deeper to gain a more thorough understanding of their resilience across supply chains. In pursuing this, they are identifying resilience that exists with first, second, and third-tier suppliers. However, organizations are struggling with the ability to predict the future due to a lack of data. As a result, there’s been an increase in the frequency of supplier performance activity and depth as well as exploring ways to increase supplier digitalization activities.
- Building a future with Sustainable Procurement
- Sustainability enhances the brand appeal, yet it only appears in 20% of procurement purpose statements.
- Sustainability remains an understated challenge for procurement leaders but provides an opportunity for procurement to step up in the new normal.
Time for action: What can you do?
1. Strengthen collaboration and innovation with suppliers
Accelerating collaboration and innovation with key suppliers will be essential to develop solutions adapted to the new normal and create a commercial and competitive advantage. Segment and identify the key suppliers that are critical to the operations and continue to engage with them.
2. Procurement digitalization and risk management
The digital transformation in procurement has also been accelerated. The help of digital enablers such as advanced analytics, big data, and AI means these tools can be used to invest in real-time information. This of course supports better risk management but also better overall decision making by enhancing areas such as spend analytics, contract management, innovation, sourcing, and supplier management.
3. Integrating sustainability
Integrating sustainability into procurement drives value through increased brand recognition, organizational performance, and stronger partnerships with stakeholders. With COVID exposing the fragility of long-distance and international supply chains, localization of suppliers has become even more desirable. Businesses will need to promote supplier innovations to offset excess costs; often synonymous with more sustainability.
4. Retaining and attracting talent
COVID has shown us why talent always matters. Today’s new working models show that the procurement skillset could change. It also encourages recruiting the right people across a diverse background, and up-skilling for the new normal will be critical. Procurement leaders will continue to put people first, ensure the safety and well-being of their teams and supply chains.
Procurement and the future
Procurement as a function is versatile and continues to evolve from cost savings to risk to innovation and sustainability. The pandemic has also opened options on what is possible in a short period with procurement proving its ability to deliver on what the future brings.
As organizations continue to evolve, procurement should continue embracing what technology offers and use it to identify opportunities to add value to organizations. ‘Procurement is not just about savings. We need to work hard to change that perception. We need to focus on our data to improve performance and real-time decision making’ Alex Jennings DS Smith. Organizations are starting to re-invent their business models. Nearly all agreed procurement as a function will play a more commercial advisory role by providing insights into more strategic decisions across costs, risk, digitalization, sustainability, and more. Procurement leaders need to define and stick to a clear vision and purpose to achieve long term sustained growth.
If you would like to participate in future procurement leadership panel debates please contact Angharad Kenward, Thibault Lecat, or Lance Younger.