You don’t have to look too far even now to understand the significant impact that COVID-19 has had on the supply chains of a wide variety of industries, both in the UK and globally, impacting their ability to be able to manufacture goods, distribute them and ultimately if goods can be secured, the prices that are having to be paid for them.
In previous economic crises such as the Dot-com bubble, the 2008 financial crisis or the sightly later sovereign debt crisis, procurement has led the recovery efforts within many industries and it is true to say that many organisations are now realising that procurement is a key enabler in achieving organisational goals with pace whether this is delivered through managing risks, accelerating innovation, driving efficiency or ensuring availability.
As we start to exit from this current crisis it is likely that the same will hold true with the exception that it is feasible, that even more will be required from the function and hence that this may only be potentially achieved if companies are able to reimagine what the procurement function does, how it actually goes about doing it and just as importantly the shape it requires to enact this change:
Initially, we should think about what has changed in the marketplace since the pre-Covid days and equally understand how our own organisational goals, expectations, timelines & milestones may also have changed. In order to be able to achieve the right mix of short- and long-term results, it is not only a matter of taking the right actions at the right time but also the ability to be able to step back and adopt different perspectives and positions on how procurement engages with the marketplace, its suppliers and within its own organisation.
As part of this review process, we should logically consider:
- The scope of the procurement team’s ambition. Pre-Covid, it would be normal to review just a few categories at a time, which would result in slow but incremental enhancements in comparison to the breadth of the genuine full-scale opportunity. To accelerate impact in the new world, procurement can take a much broader view and consider for review all categories with latent value in a much shorter timescale. This, of course, may depend upon the availability of temporary resources to complete the activity, however often the benefit will significantly outweigh the cost
- The use of digital decision-making – a well-designed e-sourcing tool helps buyers identify and prioritise opportunities whilst at the same time accelerating their decision making. Strong e-procurement tools will not only complete robust analysis but will also provide dashboards and graphics to ensure that users and decision-makers have good visibility and access to up-to-date data and insights.
- The structure of the procurement function’s organisational design – is it set up for success or has it simply developed to the current status over time? Procurement organisations should be structured in such a manner that it is aligned to the achievement of their goals in the most effective and efficient manner which, given the change experienced, is unlikely to be common pre and post-pandemic.
- The ways of working within a procurement function – contract and transactional value will be driven through optimised category, contract and supplier relationship management. Even if these basic procurement principles were in place pre-Covid, they may well require re-starting and/or restructuring given the upheaval that has been experienced by so many industries.
- Developing mutually beneficial partnerships with non-competitive industry organisations including those within the supply chain. Historic behaviours of isolated or myopic approaches should be re-considered and new thought should be given to generating value-enhancing relationships delivering benefit and quality enrichment for all engaged parties.
- Other simpler tools for consideration could be to harmonise contract conditions for an organisations long tail suppliers, to reset uniform payment terms, or to simply implement consistent performance monitoring and reporting tools.
Finally, in the post-Covid world, procurement organisations will not only need to know what they want to achieve but also the pathway that they are going to need to follow to do so. We should never forget that success is far more likely to be achieved if we have the key people in the same room, talking the same language with a common goal, the right sense of urgency and the right levels of communication.
So, is the procurement function the only answer to a recovery in the post-Covid world? No … but a successfully transformed procurement function will be one of the best tools available to an organisation to lead its recovery.
In a highly uncertain world, looking retrospectively to improve procurement functionality will not be sufficient. If you would like to understand more about 4C’s transformation service offering and/or want to review our 2021 Procurement Professionals Annual Survey on The Case for Change: Procurement Reinvented, please contact Jonathan Williams or Paul Ireland