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2020 is a year most procurement professionals will never forget. Our supply chains were thrust into the spotlight overnight while we were all sent home to address a whole new set of enterprise supply needs. Distributed teams scrambled to keep processes flowing, working from dining rooms and basements while home-schooling our children. It was not easy, but we made it work.
The supply and workforce management challenges that have arisen over the last few months have raised additional new questions. How can companies enable their people to be productive from home immediately and in the longer term? Where are people working from? Who needs the ability to remain on-site? How can the business aggregate approvals quickly so that shipments are not delayed? These are just a few of the issues facing leadership teams today – and many of the best solutions require procurement to outperform prior expectations.
Procurement professionals are amongst the most agile individuals in the enterprise. Years of investment in talent, digital capabilities, and agility have allowed procurement to absorb the blows and bridge the divides that might have otherwise brought operations to a standstill. These issues include internal demand and information requirements as well as constant monitoring of the health and viability of our suppliers.
As we move through this time of great disruption, what steps will can procurement take to build on the agility we have already shown? Better ‘future-proofing’ the business by facilitating visibility and access to products and services is an absolutely must. Procurement organizations must respond to shifting conditions, actively seeking out opportunities to become even more flexible, particularly in times of crisis.
Examining the Entire Source to Pay Landscape
When procurement’s focus is on short term impact, not all suppliers and spend categories will fit the bill. Fortunately, the broad scope of the source to pay (S2P) process provides a number of opportunities to improve procurement – and enterprise – agility.
- Demand management: Which budgeted projects and allocations are no longer needed, either because of changes in customer demand or due to altered working conditions, procurement can review contract terms and terminate or renegotiate as appropriate.
- Supplier Payments: If an organization has invested in a small or diversity supplier program in past years, now is the time to act on those good intentions. Abiding by the ‘letter of the law’ in terms of supplier payments or paying early (if possible) might keep an innovative supplier in business while preserving the company’s community reputation.
- Contract terms: Far too often, procurement signs and ‘files’ contracts, only to put them away until they are due for renewal. Any given contract may contain terms and conditions that procurement can invoke to reduce risk or spend or preserve the tone of an important supplier relationship.
Agility Today, Agility Tomorrow
Today’s investments in agility are likely to be responsive choices or acts, but in order to preserve that agility in the long term, procurement has to systematize enterprise spend management flexibility.
- Re-examine request and approval processes for unnecessary rigidity
- Consider supporting ‘self-service sourcing’ through a supplier network or approved supplier list
- Ensure that every procurement stakeholder has direct access to the information they need – from spend to contracts to suppliers – without having to go through procurement
Reinventing Workforce Management
Even before the pandemic forced major changes in how work gets done, the split between in house talent and third parties was changing. Employees currently represent only 58% of workforce spend, with the other 42% going to external resources. Now that the execution of many roles is being affected indefinitely, procurement will need to accommodate revised enterprise needs through creative contingent workforce management strategies.
- Onboarding new employees and/or contractors, including traditional company policies and culture as well as specific COVID-19 requirements and training
- Revisiting IT policies and security measures so all members of the workforce – both in house and third party – have the access and connectivity to fulfill their roles without interruption, even when off site
- Ensuring that requests for contingent workers are approved quickly, allowing distributed management and operational teams to minimize disruption
Understanding the Role Suppliers Play in Supporting Agility
Procurement cannot overlook the supplier’s perspective on the disruptions we face today. It is imperative that companies understand the financial stability of their suppliers (and suppliers’ suppliers), but now it is a top priority. A supplier’s ability to withstand hard times can make the difference between an organization’s operations continuing to roll or coming to a standstill. That said, we can’t completely blame our suppliers’ financial troubles on the economy. In many cases, recessions merely expose fractures that were already present.
Many suppliers are consumed with the need to respond to new demands, and they are adjusting their business to provide new offerings or switch sources of supply. Whether they are altering production from clothing to face masks or working to replace overseas suppliers with local alternatives, their challenges are very real. In some cases, procurement will need to get to know suppliers all over again if we are to fully benefit from their revised or expanded capabilities. When information about suppliers is managed centrally, such as through a supplier or business network, procurement can stay informed without significant investments of time.
- Monitoring and escalating supplier financial weaknesses, pre-qualifying alternatives as necessary
- Recognizing the potential impact of supplier financial stability in every new contract award and in regular review meetings with current suppliers
- Taking an active role in helping key suppliers find sustainable remedies to their cash flow or supply chain issues
Procurement is an agile function, and so we naturally take action, even in disrupted times. Being agile in a crisis means being able to adjust the most complex, business-critical functions quickly – including direct spend. In a ‘normal’ world, procurement has time to uncover alternative sources of supply, but in a crisis, this can be a painful process. Every process and technology platform should aid us in this effort – not hold us back – as we rise to meet the challenges of business in 2020 and beyond.