How procurement is reacting to COVID-19
As we continue to adapt to a world in which the behaviour of billions of people is changing almost daily, business leaders must plan and invest for a future that will bring myriad, diverse challenges. Given their position in the engine room of commerce, responsible for inter-company trade and the global movement of goods, nowhere is this more apparent than in procurement and supply chain.
But with the prospect of a persistent global recession, geopolitical tensions and nationalistic headwinds, combined with the ongoing need to decarbonise and build a fairer, more inclusive society, the demands on procurement have never been more apparent. Managing these demands while continuing to prosper and drive the growth agenda will demand creativity, collaboration and resilience.
Shifting focus to resilience over cost-saving
Indeed, when it comes to resilience, fully 90 per cent of global chief procurement officers (CPOs) from leading multinational organisations who took part in a recent Procurement Leaders study, either strongly agree or agree they will have a renewed focus on resilience over cost when designing supply chains post-coronavirus. They cited the likes of dual-sourcing and pursuing local sources of supply as gaining favour over more cost-effective methods.
As one CPO in heavy manufacturing says: “Greater supply chain mobility and flexibility are key objectives that remain in place following COVID-19 disruption.”
Smart procurement executives are working to eliminate single sources of supply to offer greater security, while shorter, more local supply chains, combined with onshore warehousing for those critical supplies where there is no alternative but to source globally, can mitigate some of those logistics and cross-border risks that continue to grow by the day.
But while rightsizing and, in some cases, remapping supply chains can be key levers in improving resiliency, focusing on the fundamentals of procurement is also important. Trusted, inter-dependent relationships with strategic suppliers can help two or more organisations to overcome challenges and take advantage of opportunities collaboratively when they arise.
Success must be measured in more than money
In many ways, the current environment provides an excellent opportunity for CPOs to showcase the full potential procurement can bring, not just in terms of savings potential, but also in fuelling growth. As we slide towards the inevitable recessionary period, procurement will be in high demand. But the secret will be to ensure procurement is seen as a source of value to the top line, as well as the bottom during this period, and to come out the other side with a more-rounded value proposition.
To this end, more than half of CPOs told us that their relationship with their chief executive had been affected by COVID-19, with a renewed focus on risk being the most cited reason (73 per cent). But almost half also claim the need to tap into new sources of value is also a driver of the changing relationship and, by extension, the increasing relevance of procurement.
A CPO from the retail sector says: “With risk and complexity comes opportunity; it is inevitable procurement will be central in shaping many of the responses to addressing long-term value.”
Positive growth is a term we’ve phrased to capture how business success must be measured in more than money terms. We have a responsibility to drive greater inclusivity, improved diversity and more sustainable behaviour in our growth agendas. It’s something procurement can and is getting behind, being an integrated part of the business, contributing to top and bottom lines, while enabling a strong sustainability agenda.
So while it was interesting to see 90 per cent of our CPO community say they will have a renewed focus on resilience over cost when designing supply chains, it was even more satisfying to see 94 per cent say there would be a renewed and reaffirmed commitment to sustainability.