Five ways procurement must evolve post-COVID-19
1. Business mission and vision
The evolution process must start with the renewal of the business’ mission and vision as well as clarifying the why and how. General awareness of procurement’s importance has never been greater, while procurement and commercial teams need to use this moment to reposition itself as a key function working with any part of the organisation that involves external suppliers. It is pivotal that it is not just seen as a cost cutting function, but as a peer to support risk and operations management, with board access and mandate.
2. Roadmap to change
Upon procurement departments agreeing a renewed vision and mission, it is worth noting each of the ROI operating model areas to help build the detailed roadmap for change. One piece of advice to give here is that there is no point striving for absolute perfection in volatile times, instead, firms should focus on transitioning to an operating model that fully accommodates the extreme levels of uncertainty.
3. Relationships and skillsets
The way employees interact with colleagues will have changed. Localisation, transparency and collaboration will be the new normal and these require different skillsets 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 proven not to work. Customers will also have different value propositions. Holistic evaluations of supply choices and the transparency of decision-making will become vital for a wider and more involved set of stakeholders. Supply chains must be more resilient, and with the reduction of globalisation, procurement operators will need much closer ties between each other.
During lockdown, it has become obvious that offices are less important that many organisations thought they were, while crossing borders has proven more challenging. 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 reset as the new ways of working get introduced, however, this will be as much demand led as supplier led. The mandate for procurement has never been greater and big strides have been made in sourcing activity in recent years, however, it is clear that more needs to be done.
Automation was already underway 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. By mixing this with a new value proposition from customers, this means current technology is not enough and needs to be upgraded to accelerate the scenario. Moving to the new normal means that the commercial and procurement vision and strategy must be renewed every 3-5 years as a minimum. This will ensure that the procurement strategy will continue to fit into the overall business strategy and serve its purpose of enabling the ultimate business vision.