Procurement Leaders: six ways to manage COVID-19 for CPOs
Now more than ever before, organisations are placing greater emphasis on spend management, supply continuity and supplier management - presenting a fresh opportunity to CPOs. In order to take advantage, procurement should position itself as the middle ground between the buying organisation and the supply base. This means that CPOs must combine a short-term, reactive mindset with a more strategic roadmap.
The report detailed key findings from over 20 CPO roundtables, in addition to a survey of over 100 CPOs to demonstrate how the pandemic has affected procurement teams and where executives should focus next. Following Procurement Leaders’ report, here are six ways CPOs are adapting to the new normal.
- The opportunity to add value
Procurement teams are increasingly embracing the new spotlight on strategic spend management and sourcing critical supplies.
53% of CPOs surveyed are optimistic they will realise their 2020 objectives, while 69% will meet or exceed those 2020 cost savings targets.
Despite the sudden disruptions and challenges to manage cash flow as a result of COVID-19, most CPOs are expressing the value the function demonstrates during a downturn. Procurement teams recognise an opportunity to review their objectives and activities to deliver value beyond savings, such as risk mitigation, continuity of operations or innovation for growth.
2. Accelerate stakeholder engagement
Prior to COVID-19, it was clear that CPOs recognised business partnering as a vital enabler for the function to align with and help deliver the organisation’s strategic objectives. Over the past few months, procurement teams have increased their collaborative efforts with internal stakeholders via three different ways; improved communication, shared key performance indicators (KPIs), and agility enabled by greater trust.
3. Evolve supplier and partnership relationships
Behind sourcing PPE, communication with suppliers is considered the next biggest challenge facing procurement teams. Effective communication is vital, both to help manage costs and to ensure supply continuity. It was found that 42% of CPOs have reviewed current SRM programmes.
4. Accelerate digitalisation efforts
In order to keep up with competitors, procurement teams must ensure that their digital transformation strategies are aligned to the virtual landscape. Procurement teams should ensure that all processes are digitised to allow for remote working, digital projects are ramped up to support business continuity as well as the automation of transactional tasks to free staff up for more strategic activities.
5. Prioritise supplier risk management
The coronavirus has exposed weaknesses in procurement teams that do not have full transparency into their supply chain beyond Tier-1. It was found that 44% have increased risk management programmes since the outbreak, while 64% have monitored the financial health of suppliers more closely.
6. Protect employees
There has been a significant rise in facemasks, hand sanitizer and surgical gloves, which has left some suppliers struggling to keep up with the demand of these requirements. With restrictions set to ease over the coming months, there will still remain a demand as organisations begin to operate post-COVID. Procurement must ensure that there is a balance between both supply and demand to keep PPE costs down.
“There is no playbook for after the crisis, we are writing it,” Amanda Davies, Global VP, MGS, Indirect Chief Procurement Officer, Mars.
For more information, check out Procurement Leaders here!
Biden establishes Supply Chain Disruptions Task Force
The US government is to establish a new body with the express purpose of addressing imbalances and other supply chain concerns highlighted in a review of the sector, ordered by President Joe Biden shortly after his inauguration.
The Supply Chain Disruptions Task Force will “focus on areas where a mismatch between supply and demand has been evident,” the White House said. The division will be headed up by the Secretaries of Commerce, Transportation, and Agriculture, and will focus on housing construction, transportation, agriculture and food, and semiconductors - a drastic shortage of which has hit some of the US economy’s biggest industries in consumer technology and vehicle manufacturing.
“The Task Force will bring the full capacity of the federal government to address near-term supply/demand mismatches. It will convene stakeholders to diagnose problems and surface solutions - large and small, public or private - that could help alleviate bottlenecks and supply constraints,” the White House said.
In late February, President Biden ordered a 100 day review of the supply chain across the key areas of medicine, raw materials and agriculture, the findings of which were released this week. While the COVID-19 health crisis had a deleterious effect on the nation’s supply chain, the published assessment of findings says the root cause runs much deeper. The review concludes that “decades of underinvestment”, alongside public policy choices that favour quarterly results and short-term solutions, have left the system “fragile”.
In response, the administration aims to address four key issues head on, strengthening its position in health and medicine, sustainable and alternative energy, critical mineral mining and processing, and computer chips.
Support domestic production of critical medicines
- A syndicate of public and private entities will jointly work towards manufacturing and onshoring of essential medical suppliers, beginning with a list of 50-100 “critical drugs” defined by the Food and Drug Administration.
- The consortium will be led by the Department of Health and Human Services, which will commit an initial $60m towards the development of a “novel platform technologies to increase domestic manufacturing capacity for API”.
- The aim is to increase domestic production and reduce the reliance upon global supply chains, particularly with regards to medications in short supply.
Secure an end-to-end domestic supply chain for advanced batteries
- The Department of Energy will publish a ‘National Blueprint for Lithium Batteries’, beginning a 10 year plan to "develop a domestic lithium battery supply chain that combats the climate crisis by creating good-paying clean energy jobs across America”.
- The effort will leverage billions in funding “to finance key strategic areas of development and fill deficits in the domestic supply chain capacity”.
Invest in sustainable domestic and international production and processing of critical minerals
- An interdepartmental group will be established by the Department of Interior to identify sites where critical minerals can be produced and processed within US borders. It will collaborate with businesses, states, tribal nations and stockholders to “expand sustainable, responsible critical minerals production and processing in the United States”.
- The group will also identify where regulations may need to be updated to ensure new mining and processing “meets strong standards”.
Partner with industry, allies, and partners to address semiconductor shortages
- The Department of Commerce will increase its partnership with industry to support further investment in R&D and production of semiconductor chips. The White House says its aim will be to “facilitate information flow between semiconductor producers and suppliers and end-users”, improving transparency and data sharing.
- Enhanced relationships with foreign allies, including Japan and South Korea will also be strengthened with the express proposed of increasing chip output, promoting further investment in the sector and “to promote fair semiconductor chip allocations”.