As we slowly pull into what seems to be a post-COVID scare world, sourcing professionals would benefit from jotting down important lessons that were learned. The economic impact was vast. The unique times tested companies, departments, and individuals themselves. Many undoubtedly learned valuable lessons that may be of benefit to reference in the future. Scares like this will happen again, and we all should be better equipped in the future with our “practice run”.
Procurement has gained extensive ground and has officially been accepted as an absolute necessity relatively recently. We were “given a seat at the table”. Skeptical companies now know we in the purchasing and procurement field are a shield against scares like COVID-19. In the coming years, I believe sourcing and procurement departments will grow rapidly. Not only direct materials will be sourced and purchased smarter, but indirect spend will be added to the procurement umbrella, as well. With this growth, will come new challenges and opportunities. Learning from the difficulty of a scare shutting down the economy will benefit us greatly.
I have been taking some notes when challenges arose throughout the last few months. Here are some of the valuable insights I gained. Some were directly related to the procurement field. Some were just brilliant, fast thinking moves that suppliers made to find revenue streams with the cards they were just dealt.
1. Aggressively vet your suppliers and know who they get their supplies from.
Many companies were left empty handed when the global supply chain was disrupted to such an extreme extent. Few planned for the disruption to be so large. Some organizations planned for blips in supply issues, but almost no company was fully prepared. It is our job as Procurement professionals to look to the future and plan for concerns that arise. No one expected a pandemic of this magnitude, but now we know what is possible. Confirm your supplier can weather the storm. Confirm their suppliers can weather the storm. Also, supplier’s financial health and the financial health of their suppliers is important to understand. A large amount of organizations went out of business within weeks of revenue shortages. If margins are that small, or their balance sheet is that unbalanced, issues should be expected.
2. Build strong relationships with your suppliers. Do not always contract with the cheapest pricing.
This is a common mistake I have seen with organizations and purchasing. The appeal to contract strictly based on pricing seems smart at the time but can really backfire. The companies that built long term, trust-driven partnerships were given a higher importance when suppliers were running low on products and services. They also were much more willing to rescue companies who were feeling the tightening of budgets. Mutually beneficial relationships turned out to be mutually beneficial for both parties. How ironic! As an Analyst at a consulting company, I saw this from both sides. The rough times allowed one customer to receive price cuts as the supplier greatly valued the relationship. However, on the alternative side I saw a supplier attempt a drastic price increase. Position yourself for the former and you will find pandemics to be much less stressful on your supply chain.
3. Leadership is everything.
Overall, the biggest lesson I learned is that leadership is the single most important factor in Procurement, or any other field for that matter. Some companies suffered while others had a workforce that remained concentrated and confident. Most took a hit financially, but great leaders stepped up and made the most of a difficult situation. I saw companies that completely shifted their focus and manufactured PPE using existing lines. This brought large amounts of revenue and kept their workforce active. This is quick thinking and shows that those in charge can act rationally under pressure. I saw companies shift a whole department to fulfill an influx of orders. The great part was the department was made up of office workers who typically were responsible for much different tasks. But they were glad to jump in, maintain their job, and help leaders who were helping them.
There were many good examples of leadership throughout this pandemic. However, I experienced a great one as a final example. I was a new employee when the Corona virus fears began. We quickly closed our offices since we have the opportunity to be effective from home. Immediately, I was fearful because I was barely underway. I did not have a lot of time to prove my value. Luckily, I stumbled into a few projects that were important and I was moving forward. The worry that lay offs would happen was still in the back of my head. Multiple friends had already gotten laid off. Even though you expect an Executive to attempt to instill confidence in the workforce, it often is not the simplest to believe. I believed my executive team and immediate boss this time, though. I was three months in, and something was different. I could feel the honesty. I could feel that the decisions were being made with the team in mind. It was strong leadership and it was the difference maker to me. I was motivated and eager to prove myself to return the dedication to the company. It got me and the company through this frightening time.
What important lessons have you learned throughout the COVID-19 pandemic?