Coronavirus or Covid-19 has undoubtedly wreaked havoc on the world. While the impact on human life and the economy has been catastrophic, supply chains have been severely impacted as well. Whether you’re a fortune 500 company or a mid-tier organization, the true disruption to operations, sales and balance sheets caused by the impact to supply chain has yet to be fully determined. One can only hope that once this is all over, the economic downturn doesn’t last for long. Nonetheless, businesses must continue operations in this brave new world and figure out a way to be nimble on their feet. We may all be working from home, but we must do everything we can to support operations and ensure that Procurement can be a difference maker in the midst of this crisis.
“Time for Procurement to step in and save the day”
Procurement’s role then vs. now
Traditionally, Procurement has played the role of facilitator. Ensuring sourcing and purchasing activities are conducted smoothly, on time and efficiently. Procurement is also responsible for reducing supplier risk, ensuring contractual compliance and supporting Finance in maintaining tight control over invoicing. However, Covid-19 has suddenly provided Procurement with an opportunity that is a call to action. No longer is Procurement in a reactive state (despite actual events) but instead this is Procurement’s moment to shine, to be a prime actor in helping save the business from taking further hits. Often relegated to the bottom of the C-suite agenda, the time has come for Procurement to shoulder the responsibility to carry the business and save the day. It truly is time for Procurement to step in and be the leader we all know we are. But how?
Procurement’s time to lead
So what’s a procurement practitioner to do? Here are some helpful tips:
- Renegotiate existing agreements, rate cards and terms
This is as good a time as any to renegotiate current contracts and seek deeper discounts from your current supply base. While your supplier base may be under duress during these uncertain times, true partners will be open to a temporary relief especially if the business can make concessions down the line.
- Competitive sourcing
Now is as good a time as any to start competitively sourcing your addressable categories. The old adage “the best time to invest is yesterday and the second best time to invest is today” holds true in this context. Introducing competition to your sourced and un-sourced categories can reap tremendous benefits and be an important and impactful difference maker to the organization’s bottom-line. Ask yourself the question: could your organization use an additional 5-10% cost savings in these tumultuous times? Our guess is that your answer is an unequivocal yes!
Co-incidentally, we can help with this while contractually guaranteeing savings!
- Secure your supply chain risk for now (and forever)
Assess and analyze your supply chain risk based on historical patterns and current disruptions and consider not only optimizing your supply base but also expanding supplier base where the disruption and impact to business is high. Allow me to explain as these two strategies may sound contradictory. Consolidating your tail spend suppliers for non-strategic categories will help capture cost savings in the short term. In the long run, this can allow you to have better control and compliance over your supplier partnerships. On the flip side, adding suppliers to categories where you have a limited supply base will allow you to have fallback options that may not currently exist. It is prudent to not view every category through the same lens.
- Procurement and AP automation
Cash flow is king when disruptions occur. Automating and having a 360 degree visibility into your purchasing activities can and will allow procurement to be a closer partner to AP. This ensures tighter control over spending and contractual compliance. Such automation and visibility is critical when the organization wants to curb non-essential spend and get a better grip on spending.
In closing, while we all hope and pray that these tough times pass quickly and without much of an impact on the economy, the world will undoubtedly have changed once we emerge from this. As a procurement practitioner this is a golden opportunity for us to rise up and see these challenges as opportunities. Opportunities to be a significant contributor to the business beyond simply streamlining purchasing. As demand and revenues slow down, procurement can help make up the gap by contributing to net incomes by cutting costs, reducing risk and optimizing supply chains. Now more than ever is the time for our voices to be heard and for us to make a significant difference to the direction of our business.
About the author:
Managing Partner, Americas
Saurabh Mehta is a business leader, mentor, friend and Managing Partner for Consus Global, Americas, leading sales and operations. Saurabh brings rich experience of over 20 years across Sourcing & Procurement from companies like Ivalua, AVON, Time Warner Inc and Accenture.