Procurement has evolved: the new features of post-pandemic procurement
The pandemic has challenged every business function to change the way it operates and adapt to a new normal. For some, these changes have already been reversed. But for procurement, there is no turning back.
The COVID-19 pandemic has forced virtually all business functions to change the way they operate, take on new roles and adapt to extremely difficult market and operational conditions. For many of these functions, these changes – while significant – were short-term and designed to help them weather the storm.
But, for procurement teams, the pandemic has accelerated the evolution of the function, which was already well advanced before COVID-19 hit. He propelled the career path from “back office spend optimizer” to “strategic value creation star”. And now there is no turning back.
Over the past 18 months, key sourcing functions have intensified to deliver business value far beyond simple cost savings and maximized margins. Unsurprisingly, their organizations want them to continue providing it.
As a result, we see a new kind of procurement function emerging from the pandemic. This is a stronger and more autonomous function, characterized by three key developments:
Evolution # 1: From reactive damage mitigation to proactive risk expert
Purchases have always been strong in times of crisis. But in the past, teams were limited by the historical price, demand, and trend data they had. This retroactive view meant that procurement teams always looked for the best ways to respond to a crisis, rather than proactively avoiding emerging threats.
With recent advances in analytical and intelligence capabilities, as well as the emergence of sophisticated information dissemination solutions, the crisis events of the past 18 months have given us our first real opportunity to see the power of proactive crisis analysis in action.
Procurement teams with these capabilities were able to identify early indicators of major supply chain disruptions and take proactive action to protect against them. They switched from vendor to vendor, sourced from new geographies, and rebuilt entire category strategies to ensure their businesses could continue to operate as conditions deteriorated.
But business continuity was only the beginning of the benefits these teams saw. Because they were able to observe the emergence of these trends, the main procurement teams were able to map and understand the potential impacts of each crisis on the company and provide valuable information for crisis management and mitigation. risks.
Evolution # 2: From supply manager to strategic innovation driver
During the pandemic, supplier relationships have been more valuable and important than ever. At the height of the disruption, the right relationship with a strategic supplier could be the difference between the status quo and a complete halt.
Key sourcing teams have built valuable supplier relationships for decades, but the events of 2020 and 2021 have been a tremendous opportunity to show their value to the rest of the organization. As a result, organizations are now more interested than ever in the other great ways that procurement teams can create value from these relationships.
Exclusivity contracts negotiated with suppliers, for example, are a valuable asset in supporting innovation. Through the contracts they help create, procurement teams can build partnerships that have a huge impact on overall business strategy, bringing new USPs into the organization.
As the first point of contact for suppliers, no one in the business knows what is going on with these suppliers better than your procurement team. This means that they are exposed to things like new products, new materials, new capabilities and new offerings before anyone else, all of which can be used to drive business, product and innovation strategies.
Today’s management teams don’t just fill orders and sign invoices for suppliers, they partner with them strategically. Today, companies are realizing the implications this has for innovation and harnessing the potential of procurement teams as drivers of innovation.
Evolution n ° 3: From data comber to action-oriented all-star
Procurement experts can spend hours sifting through data to identify trends that can impact the products, markets, and suppliers they depend on. It is admirable and it has brought immense value to businesses. But today, that’s not necessarily the best use of the procurement team’s time.
In recent years, sophisticated analytics and intelligence solutions have transformed the way procurement teams collect, consume, understand and act on product and market information. And again, the pandemic has proven to be a powerful test of how these capabilities support teams and enable value creation in times of crisis.
In an age where every second counted, procurement teams saw immense value in these solutions and leveraged them to act faster and stay ahead of competitors facing the same challenges and choices.
Take Nomad Foods, for example. When the pandemic first struck, she used The Smart Cube’s intelligence solutions to quickly understand the potential impact on key categories and adjust her supplier portfolio to keep the business on track. But, because the team was able to act so quickly, they were also able to look beyond continuity and identify an opportunity to create value and reduce waste in the midst of disruption.
The team identified that closing many restaurants and hotel businesses would have a dramatic impact on many food categories and create a significant short-term oversupply of many ingredients. By spotting this opportunity early, Nomad Foods was able to act ahead of its competitors and optimize its category strategy at a time when many other companies were struggling to keep their doors open.
Many stories like this have emerged from the pandemic. Together, they have helped organizations understand that the modern procurement function is able to deliver the greatest value when it is equipped with timely and actionable information through the right tools and technologies, rather than having to generate this information manually.
Omer is co-founder of The Smart Cube and leads the company’s activities in the Americas. He works with purchasing and strategy leaders in global organizations, transforming their teams to become value driven and insightful. Omer has over 30 years of management consulting, global business and industry experience in North America, Europe and Asia. His previous roles include AT Kearney (North America), Warner Lambert (US) and The Perrier Group (Asia-Pacific). Omer holds an MBA from the University of Michigan in Ann Arbor, USA and a BBA from the University of East Asia.