As the economy begins to bounce back from the global health crisis, companies are working hard to rebuild and reassess how to drive growth. Procurement teams must adjust to a world focused on cost-centric measures as companies rethink the role of procurement to focus on cash management, savings, and supply risk mitigation to enable growth and agility.

As we build/ change our strategy, some key questions that arise are:
  1. Are we throwing prior strategies out of the window, making minor changes, or staying the same?
  2. What are the best practices for cash management in a cost-centric environment?
  3. How to set coherent savings targets aligned with corporate strategy?
  4. How should we manage supplier risk and uncertainty?
There’s much being said about post covid world and how it impacts the role of procurement. 

Procurement leaders were close to unanimous in agreeing that a re imagination of the procurement function will be required, both to succeed in recovery efforts and to transition to a new operating model that’s fit for the new normal. 

CIPS Procurement may need to renegotiate its relationship with finance departments, recognizing that a successful result should be determined by both qualitative and quantitative metrics. This is important because years of work applied to strengthening business relationships with suppliers can be quickly undone if the CFO dictates a refocus purely on achieving cost savings and improvements to working capital.

Is this going to be an inevitable mandate response by finance when emerging from the pandemic? If so, it will require a certain level of maturity for procurement to stand up to this dictate and demonstrate an alternative approach. 

Ardent Partners also conducted a survey in 2020 on Procurement Metrics that matter. Pre-Covid, the top concerns for a procurement organization revolved around driving digital transformations, improving processes and increasing agility. What is interesting is that prioritizing cash management seems to be top priority for organizations post-Covid. Increasing savings and improving visibility into the overall supply chain are the other areas of focus as per this survey.

In order to enable growth and build agility, focus on these 3 areas can guide and enhance your approach to any transformation plans.

Cash Management is at the forefront of every organisation’s agenda to drive performance. Some of the activities to focus on to gain traction include re-evaluating your business model, optimising your operational flexibility, capital availability market reach, accelerating decision making and strengthening your personnel/talent.

Savings has always been the biggest measure of a procurement organisation's performance and can play a key role in your big picture transformation plan.  It’s also important to refine policies, understand and define training needs for your team, gain stakeholder buy-in to drive results and establish a supplier relationship management process as you start building this roadmap. Understanding your supplier contracts in detail will help you narrow down on those potential quick wins and can act as a starting point for the roadmap.

Supplier Risk Management : Traditionally, Procurement focus on supplier risk management constituted of t continued efforts with existing providers to improve the relationship, multiple rounds of attempted negotiations based on negotiation strategy and working sessions to improve service and account management. Although these are great things to do, a better way to improve relations with supplier to minimise risks would constitute engaging incumbent in current scope and quality discussions, vetting alternate providers based on specific requirements, using sourcing process to refine understanding of emerging trends and technology and leveraging market data to engage incumbent in conversations around performance, process & innovation, and cost improvements.

The value of a procurement organisation lies in not only driving savings, efficiency and compliance but also delivering value-based strategic procurement that can translate into bottom line improvements to the corporation …to ensure that the Procurement strategy is aligned with, and that it rolls-up to, the overall corporate strategy.

All activities individually have value, but the sum of their parts delivers the best results (e.g. spend analysis without strategic sourcing doesn’t bring savings in the door).

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Vidya MacLeod

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