Five ways procurement must evolve in the post-Covid world

14 July 2020 Consultancy.uk

According to procurement expert Jeremy Smith, the world has changed drastically over the course of the Covid-19 pandemic, and so the industry must evolve to meet a diversity of new requirements. If it can, however, the 4C Associates Managing Partner believes procurement operators have never had a greater opportunity to demonstrate huge value to the economy. 

While the restart of the economy is on the way, there is a reality for most organisations that the business will not return to the way it was, or at least not for some time to come. Buying habits have changed as many customers will have reconfigured their priorities, operations may need to be restructured to deal with increased cautionary measures, and procurement and supply chains will need fundamental reviews.

This review must consider the immediate crisis actions taken, the turnaround measures implemented and the changing requirements of the new normal to ensure that today’s supply chain will not only survive the next six-12 months, but also reflect the changing needs downstream to the ultimate end-user or customer. This process needs to start today with a dedicated team able to work with the uncertainty that is part of any crisis, and 4C Associates analysis suggests there are five key areas which procurement firms must consider to successfully adapt.

Jeremy Smith, Managing Partner 4C Associates

Business mission and vision

The evolution process must start with the renewal of the business’ mission and vision and clarifying the ‘why’ and ‘how’. General awareness of procurement’s importance has never been greater. Procurement and commercial teams need to use this moment to reposition themselves as an integral function working with any part of the organisation that involves external suppliers. It is critical that it is not seen as an administrative or cost cutting function, as has been the case in some organisations, but as a peer to support risk and operations management, with board access and mandate.

Roadmap to change

Once procurement firms have agreed a renewed vision and mission, it is worthwhile considering each of the ROI operating model areas (relationships, operations and infrastructure) to help build the detailed roadmap for change. One piece of advice to give here is that there is no point in striving for absolute perfection in such volatile times. Instead, firms should focus on moving to an operating model that fully accommodates the extreme levels of uncertainty.

Relationships and skill sets

The way employees interact with their team-mates and colleagues will have changed. Localisation, transparency, and collaboration will be the new normal and these require different skill sets in addition to the current supplier management approaches. Empathy will become the key skill in managing suppliers as detailed understanding of the commercial and operational reality for the whole supply chain is necessary, and people move beyond self-preservation, as that has been shown not to work. Customers will also have different value propositions. Holistic evaluations of supply choices and the transparency of decision making will become more important for a wider and more involved set of stakeholders. Supply chains will need to be more resilient, and with the reduction of globalisation, procurement operators will need much closer ties between each other.

Operations

Over the course of the lockdown, it has become clear that offices are less important than many companies thought they were, while crossing borders has proven more difficult. In a first step, simply asking suppliers what they would now change about existing processes will drive a step change in performance. Ultimately there is going to be a cost structure re-set as the new ways of working get implemented, but this will be as much demand led as supplier led. Really understanding how this will work will require collaboration and not blunt negotiation.

The mandate for procurement has never been greater and big strides have been made in sourcing activity in recent years, but more needs to be done. SRM should move out of the preserve of operations who were more interested in ensuring good relationships and ticking a process compliance box than they were in risk and supplier resilience and continuity. Procurement policies should be revisited off the back of the Covid-19 learning to ensure that supplier management policies are bolstered, and best practice rolled out across the organisation.

Infrastructure

Automation was already under way and will lead to a degree of near-shoring and on-shoring as production moves away from reliance on cheap sources of supply in the Far East. Combining this with a new value proposition from customers means that current technology is not sufficient and needs to be upgraded to accelerate this scenario. The community spirit and concern for each other during the fight against Covid-19 will become embedded in business relationships. Global industry is also seeing an increase in the sharing of assets such as IP, capital assets and resources. This will be adopted beyond the crisis as normal practice.

Moving to the new normal, the commercial and procurement vision and strategy must be renewed and then again, every 3-5 years, at a minimum. This ensures it continues to fit the overall business strategy and serves its purpose in enabling the ultimate business vision. In addition, now is the time to start developing and implementing changes to operating models across ROI areas.

If nothing else, Covid-19 has demonstrated to the world the vital importance of commercial, procurement and supply chain teams, and presents one of the greatest opportunities to reset the role of procurement. The current situation has highlighted in the most terrible way possible that procurement firms must invest in their supply chains and ensure they serve companies in all scenarios, not just the race to the bottom of short-term margin.


Profile
More news on
×