REIMAGINING PROCUREMENT FOR THE NEXT NORMAL The COVID-19 pandemic has put an enormous strain on global supply chains, at

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REIMAGINING PROCUREMENT FOR THE NEXT NORMAL
The COVID-19 pandemic has put an enormous strain on global supply
chains, at times halting manufacturing while shutting
down airports and seaports, interrupting delivery of raw materials
and finished goods. At the pandemic’s onset, procurement
departments switched to crisis-management mode to help companies
alleviate disruptions, including sourcing personal
protective gear for employees and helping smaller suppliers manage
their cash flow. Based on research and feedback from
global procurement leaders, there is a belief that companies can
continue to rely on procurement to recover from the
current crisis, in much the same way that they used the function to
recover from past crises. But for procurement to lead the
way, companies will want to reimagine not just what the function
does but also how it operates and which new capabilities it
will need. Research analysis suggests that procurement could gain
the most by focusing its strategic initiatives in five key
areas: strengthening supply-chain resilience, zero-basing the
design of category value-creation strategies, investing in
supplier partnerships and innovation, accelerating adoption of
digital and analytics, and transforming to an agile operating
model. By proactively making these changes, procurement leaders can
not only counter some of the worst effects of the
crisis but can also set themselves up to prosper in the
future.
Procurement has led prior crisis-recovery efforts
Companies have a lot to bounce back from. As of this writing, many
of the world’s largest economies were experiencing
record-breaking economic contractions. Yet procurement has helped
companies’ weather global crises before. According to
research, in the five years immediately following the 2008 global
financial crisis (GFC), total return to shareholders (TRS)
for
companies with top-quartile procurement capabilities was 42 percent
higher than for companies whose procurement
operations were in the bottom quartile. While procurement can again
play a crucial role in recovering from a crisis, this time
procurement leaders will want to take a different approach to the
function in addressing a range of new issues. In a recent
survey conducted, top Asia-Pacific procurement leaders pointed to a
significant difference between recovery efforts after
the GFC and what’s happening now. Then, most companies focused on
strategies to recover from the financial effects of
the recession. Today, in addition to recovering profitability and
finding ways to preserve cash, companies face the added
challenges of shifting supply-market dynamics, changing ways of
working, increasingly volatile demand, and de-risking their
supply chain to make it less vulnerable to disruption.
When the pandemic disrupted deliveries, it highlighted the issues
in a complex global supply chain. In a separate McKinsey
survey, 93 percent of procurement and supply-chain leaders said
they planned to increase the resilience of their supply
chains, and 44 percent said they would be willing to give up some
short-term efficiencies to get it—although this sort of
trade-off can prove avoidable in some cases. Building relationships
with more diverse suppliers may help companies
withstand further disruptions in supply availability. The pandemic
upended market dynamics and value pools in many
industries: for example, expanding value pools for tech companies
with cloud-based platforms that help remote workers
communicate and collaborate, while adding pressure to commercial
real-estate markets and the airline industry. Decadesold
paradigms are being upended: ever-increasing global sourcing now
potentially giving way to regionalization of supply,
and lean inventory targets being reset in favor of higher buffer
stock. The pandemic upended market dynamics and value
pools in many industries: for example, expanding value pools for
tech companies with cloud-based platforms that help
remote workers communicate and collaborate, while adding pressure
to commercial real-estate markets and the airline
industry. Decades-old paradigms are being upended: ever-increasing
global sourcing now potentially giving way to
regionalization of supply, and lean inventory targets being reset
in favor of higher buffer stock.
Work from home was becoming popular even before the pandemic.
Forced social distancing accelerated the reimagining of
the workplace—and in particular the switch to remote work—faster
than almost anyone could have predicted. As in other
departments, the shift changed how procurement operates. Team
meetings, supplier site visits, negotiations, and other
face-to-face interactions that procurement professionals took for
granted went virtual or went away—all calling for a new
ways of working. These new ways of working require new skills: data
engineers and data scientists are becoming
increasingly commonplace in leading procurement departments, and
demand for data capabilities is increasing across the
function. Procurement leaders will also want to step up on the soft
skills required to cultivate solid partnerships with
suppliers and to collaborate more effectively with internal
functions across the business in a more agile manner. This
will
require attracting new talent and upskilling the existing talent.
Leading organizations are adopting virtual training methods
and gamified digital tools to engage experienced workers and
develop their talent. The winning procurement organizations
will adopt a continuous learning culture as a way of life.
Procurement can drive an organization’s pandemic recovery
efforts.
Forward-looking companies will go a step further and completely
reimagine what the function looks like to enhance the
value that it can deliver. Investing in stronger, future-ready
practices and capabilities will pay off in the short term, and
help
organizations emerge stronger and better prepared for any future
crisis.
“The pandemic resulted in disrupted deliveries and many other
supply chain management related issues, 93 percent of
procurement and supply-chain leaders said they planned to increase
the resilience of their supply chains, and 44 percent
said they would be willing to give up some short-term efficiencies
to get it—although this sort of trade-off can prove
avoidable in some cases”.
In light of the statement and making reference to the case
study, examine the various measures and strategies that can
be
adopted by the procurement function in increasing supply chain
resilience.