In the Coronavirus era businesses are experiencing cash flow challenges which creates the relatively obvious opportunity for procurement to step into the role of saving money.
Yet there has arguably never been a more urgent moment for procurement professionals to step up, lead and play a broader, more strategic role than ever before.
Here is my view of the three most critical areas where procurement can add value:
Supplier relationship management
We are experiencing global shortages of critical products which are key to keeping businesses afloat. Companies with positive, structured relationships with their suppliers will be more successful at securing these products and the best will also have deep enough relationships to innovate new solutions. Companies who have a more transactional relationship with their suppliers will be at the back of the queue for supply.
Questions to ask:
Have you identified your company’s key suppliers? Do you have peer to peer relationships between your respective boards? Do you have a structured process in place for managing the relationships? Do you pay on time? Do you have valid contracts with key suppliers? Do you focus too much on cost in your tender processes?
Risk management
Many of the top items on your boards’ agenda will be supply chain related. Procurement teams are in a strong position to take a lead on proactively identifying the supply chain related risks with mitigation plans to address them. For example, how many teams are proactively monitoring the financial health of key suppliers and promptly acting to address issues as they arise?
Questions to ask:
Do you know where your input goods are made and produced? Do you know who supplies the raw materials? Have you documented the logistics route (if ports / airports were closed)? Do you have contingency sourcing options for key items? How quickly could you activate your contingency sourcing plan to avoid other first movers getting there first?
Cost control
I could not write a post about procurement without a section on cost control. CFOs are grappling with quickly re-forecasting company revenues more often than ever before as this crisis unfolds. Internal budgets will undoubtedly be cut and strong processes will be needed to tighten up approval to avoid people over spending. Specifications will need to be challenged, untouched areas of expenditure will suddenly be open for review and more innovative ideas to reduce costs will be needed.
Questions to ask:
Do you have a process to challenge discretionary spend? How can procurement be involved in the budget setting process? What changes could be made to the travel and expenses policy?
Biting the bullet
The Covid-19 era will challenge us all like we have never known before. For procurement, the time is well and truly now to bite the bullet and show leadership quickly and urgently in several areas. I am convinced that driving the agenda forward in these areas sooner rather than later will be critical in weathering the storm and will ultimately set up procurement and your wider business with the foundations for a much better future.
