At the turn of a new year, it’s common practice for individuals to not only reflect on how far they’ve come and what they’ve learned, but to apply what they’ve learned to new resolutions and goals. Businesses are not exempt from this tradition. As we leave 2020 behind, procurement professionals have a lot to reflect on, including how their roles have changed, are changing, and will continue to change in a post-pandemic world.
Traditionally, the role of procurement has mainly focused on cost savings. While this role has expanded over the years, the COVID-19 pandemic has accelerated this evolution. Dominic Regan, a senior director at Oracle Corporation who specializes in supply chain management, put it well when he said, “The current environment has put a focus on the supply chain like never before and has exposed several vulnerabilities—a lack of visibility, flexibility and agility being the major issues that have come to the foreground.”
In other words, as organizations have struggled to stay afloat during the pandemic, procurement professionals have worked hard to adapt and show up for their businesses in new ways. The work, however, is far from over.
Business continuity planning
The pandemic’s impact on supply chains has unveiled just how unprepared many businesses were for a large-scale crisis. Thus, procurement’s top priorities have been shifting to include risk mitigation and disaster recovery, both of which fall under the category of business continuity planning.
By mapping the supply chain and keeping an eye on the various dimensions of risk, procurement specialists can identify which spend categories carry risk potentiality and in turn create a plan to diversify, or multisource, where possible. The four basic dimensions of risk, according to Dr. Tobis Schoenherr, a professor of operations and supply chain management at Michigan University, are defined as follows: disruption of the physical flow of the product through the supply chain; sudden and unexpected increases in costs or prices; security of the product or its condition as it moves along the supply chain; and activities by suppliers that could reflect badly on enterprise.
Evaluating the financial health of a supplier and the collaborative health of the buyer-supplier relationship is also important, given that not all supplies can be alternatively sourced with ease. Additionally, it’s always a good idea to talk to incumbent suppliers about what they can do to reduce risk. Otherwise, you may be trading one type of risk (i.e., single source) for another (e.g., geographic concentration risk). Finally, concentrate on implementing measures that can withstand a variety of impacts, because some outcomes, as we’ve seen, are near impossible to predict.
Enhancing technology & data savviness
As usual, embracing digital tools continues to be a top priority. The adoption of new technologies is increasingly leading to more automation of purchasing and procurement tasks. In response, the U.S. Bureau of Labor Statistics projects a seven percent decline in the overall employment of these roles from 2019 to 2029, stating, “As procurement technology continues to improve, less complex procurement functions, such as finding suppliers or processing purchase orders, will likely be automated.” This trend gives procurement professionals even more reason to evolve and increase the value of their role within an organization; however, this doesn’t mean they should be scared of using digital tools to their advantage.
It’s no secret that digital tools have created massive opportunities for driving efficiency in procurement functions, including the management of internal transactions and organization of data, as well as vendor engagement and contracting processes. Such technologies continue to advance, which means procurement professionals must become comfortable with them if they haven’t already. And though these advancements can be difficult to keep up with, they undeniably create greater visibility for businesses. For example, advanced electronic manufacturers use comprehensive dashboards that allow them to view the full status of production and shipment. These dashboards refresh every 20 minutes to provide real-time overview of the entire supply chain. No procurement professional can deny that this level of visibility when it comes to sourcing is extremely valuable; it also frees up time and energy to focus on other key aspects of the procurement role, such as strategic partnerships.
Providing value & creating trusted relationships
While technology will continue to be an important tool to utilize in procurement processes, fortunately, the human element will never go out of style. In fact, shared investment, trust, and transparency are critical in the type of relationship that procurement aims for with suppliers. “Having the appropriate kinds of relationships with suppliers and managing those relationships effectively is critical to making sure we can execute [a] best-value purchase,” says Schoenherr. “Companies are not buying just the product or services from a supplier. They are buying its capabilities and expertise.”
An in-depth understanding and real concern for the business’ or client’s specific ambitions and goals are also necessary. According to a 2020 study titled Conditions for Deep Supplier Engagement by procurement specialist Gina Gerhart, “Analyzing the similarities and differences between modern businesses and how their sourcing decisions are made is crucial to better understand the motivations for developing suppliers. It was found that many companies have similar goals when investing in supplier health, but that the sourcing approach might differ based on age and size of the business, along with the stage of growth the business is in. This research shows that there is no ‘one method fits all’ when it comes to strategic sourcing. The strategy needs to be more tailored to the current business needs and goals.”
Lessons learned & more to come
Overall, developing mutually productive partnerships and improving internal communications are just as important as the next shiny, new digital upgrade. When buyers and suppliers work together to innovate and collaborate on processes such as design and production, for example, they both can reap the most value possible. By forming strategic alliances such as these, and by prioritizing business continuity and technology enhancement, procurement professionals take part in an even bigger purpose of healing the supply chain as a whole. The key is to keep a beginner’s mindset while using the wisdom gained to forge head.
By: Mara Michael
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