blog post

Procurement in 2020 - The new normal

Ankur Tripathi
Jul 22, 2020·5 min
0 upvotes

The Covid-19 pandemic created worldwide chaos and misery, making it one of the most infamous and historical events of our generation. Businesses and supply chains had to face major disruptions across the world, and aggressive preventive measures such as minimum contact and lockdowns to curb the virus shattered the backbone of the economy.

As of June, most of the businesses have shifted their priorities and are looking to stay afloat as a knee-jerk reaction to the current situation. Experts are predicting a slow economic recovery. According to a report by FastCompany, 91% of organisations believe that they should be re-skilling their employees amid the pandemic, however, only a fifth of them are currently in the process of doing so. In the Procurement world, due to the disruption of the supply chain, procurement leaders are expected to revamp the entire structure of the business. If the procurement leaders rise up to the occasion and change the way they normally work, they can very well revamp the broken structure. Let’s look at the ways procurement leaders can change the way procurement is done in 2020 - making it the ‘New Normal’

There are certain questions which procurement professional should be looking at, viz:

  • How can we ensure our supply chain does not face such disruptions again?
  • How to develop more meaningful and trustworthy supplier relationships?
  • How to mitigate risks and create a resilient mitigation structure?
  • How to assess the vulnerability of our critical suppliers?
  • Do we need to re-strategise our policy regarding backup stocks?
  • Does the upper management see Procurement as an integral part of business or more like a vestigial part?
  • How to ensure that sourcing and procurement becomes a strategic part of my company?

In order to answer these questions, procurement professionals should change the way we they procure and add value to the business. In order to ensure that, they need to focus on these four core skills:

  • A resilient risk management structure
  • Insights from data analytics
  • The art of negotiation and sourcing
  • The human side of things

A resilient risk management structure

After the Covid-19 pandemic, the first and foremost action that any strategic procurement professional needs to take is risk management to better protect businesses against similar black swan events in the future. The way to ensure that is by finding leakages and vulnerabilities in the supply chain, diversifying the supplier base, and creating a more resilient financial structure. To read about these risk management practices to help create a robust supply chain, click here.

Insights from data analytics

“Data is the new oil” - Clive Humby

If data wasn’t already prominent in the procurement industry, it will start to be. Having all the procurement decisions in a quantifiable manner would help procurement professionals garner new insights about the spends, disruptions, critical suppliers, market trends and predict future outcomes based on the trend history. When companies will know beforehand , where the disruption might come from geographically and which products will be impacted, they will have time to execute mitigation strategies immediately.

The art of negotiation and sourcing

Negotiation is one of the most important skills for a procurement manager, and after the Covid-19 outbreak, it is imperative that procurement leaders make the most of that skill. With a strict lockdown almost everywhere, many companies were forced to resort to online engagement with the suppliers either via video conferencing software or through the e-auction platforms of their choice. Cloud solutions can be disruptive in this case, helping it in terms of cost and time effectiveness. Many e-auction platform come with their own way of engaging with the suppliers. Procol has coded a new way “Traffic light bidding” in order to ensure the best prices from the suppliers. In traffic light bidding, based on the price range, the buyer can set a zone for the vendors, if they are closer to the desired price range, they will be notified via a green light, if they are moderately close, the light will be yellow, and if their bid is completely off the charts, a red blinking light will notify them to make their bidding more competitive. This gives a competitive advantage as none of the sellers can see the price at which the other sellers are bidding at. Procurement managers should consider this as the new normal and move away from their reliance on face-to-face meetings with the suppliers.

The human side of things

Perhaps the most important skill that procurement leaders can showcase in these times is their emotional quotient. The novel coronavirus has resulted in a great deal of uncertainty across the globe. Work from home is bringing its own caveat - stress, mismanagement, even risk of job security. In these tough times, leadership, empathy and emotional quotient are the most important skills, even more than strategic sourcing and negotiations. The easier procurement professionals would be able to convey their thoughts to the upper management and the vendors the smoother the transition would be.

With the changes in consumer behaviour, procurement leaders need to play the catch up game and tweak the way their business handles spending and budgeting. Things will definitely not go back to normal before 2021, or it may never go back to normal. Hence, there is a need to show leadership and take on additional responsibilities and initiatives that are fundamental to the core of procurement. Strategic thinking, building empathy, embracing digitalisation, effective communication and analysing data should be on top of the priority list.

Every chaos brings an opportunity, and if procurement leaders can change the way they procure, they can cement themselves as an integral part of the new normal.

procurementcovidsupply chainpandemic
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