The impact that the COVID-19 pandemic had on businesses is well-documented. It triggered global digital transformation and many businesses were forced to reconsider their operating models. Procurement is no different.
Indeed, a stronger and more empowered procurement function has emerged. In many ways this evolution was well underway before the pandemic. But the key change has been that procurement is no longer a “back office spend optimiser”, it is now a “strategic value creation all-star.”
The fact of the matter is, since the pandemic began over two years ago, leading procurement functions have stepped up to deliver business value far beyond simple cost savings and margin optimisation. Now, their organisations want, and expect, this to continue. So, what has changed?
Proactive risk mitigation
In the past, procurement acted more as a reactive damage mitigator than a proactive risk expert. This was largely due to the fact that teams were restricted by the historical pricing, demand and trend data available to them. Therefore, procurement teams focussed on looking for the best ways to react to a crisis, rather than sidestepping emerging threats proactively. That is not to say that this was a weak function, procurement has always been strong in times of crisis.
However, recent advances in analytics and intelligence capabilities, as well as the emergence of sophisticated insight-delivery solutions has meant that the function is even stronger now. The COVID-19 pandemic has been hugely challenging for businesses, which has given us our first real opportunity to see the power of proactive crisis insight in action.
The key change here is that these new capabilities enable procurement teams to identify the early indicators of major supply chain disruptions and take proactive actions to safeguard against them. The result is that when a potential issue is identified they are able to shift between suppliers, source from new geographies and rebuild entire category strategies to prevent disruption. The pandemic was a living case study of this.
Business continuity is just the beginning of the benefits seen by these teams. By gaining a clear view of the emerging trends, leading procurement teams can use this information to forecast the potential impacts of each crisis on the business. From this, they can develop crisis management and risk mitigation plans.
Strategic supplier partnerships
It is no secret that the pandemic caused supply issues so it goes without saying that supplier relationships were more valuable and important than ever. Indeed, the right relationship with a strategic supplier could mean the difference between business as usual and completely halting operations. These strong relationships between procurement teams and suppliers are not new, they have been built up over decades. But the events of 2020 and 2021 shone a spotlight on their importance.
Now that the world is starting to emerge into a post-pandemic landscape, organisations are starting to think about the other great ways that procurement teams can create value from these relationships. An example is negotiating exclusive agreements with suppliers to ensure that they become a key, tangible asset for supporting strategic innovation. These contracts, and the resulting partnerships, can help procurement teams to have a huge impact on overall business strategy, bringing new USPs into the organisation.
Procurement teams are the best placed to manage these relationships. They are the first point of contact for suppliers and, in most cases, gain first exposure to everything from new materials, new offerings, new capabilities, to new products. These are what commercial, product, and innovation strategies are built on. Businesses are waking up to procurement teams’ potential as innovation drivers and key strategic players.
Sophisticated insight and intelligence solutions
Another change the pandemic has fast-tracked for procurement teams is the end of data combing. In the past, procurement experts could spend hours sifting through data to identify trends that might impact the commodities, markets and suppliers they depend on. There is certainly value to this exercise, but it is not time effective. Instead, new technologies can take some of this burden away from the procurement teams – freeing up their time for more strategic, value adding activities.
These sophisticated insight and intelligence solutions have transformed how procurement teams gather, consume, understand and act on commodity and market intelligence. The pandemic once again acted as a live case study of how these capabilities can support teams and enable value creation in times of crisis. The immense pressure on procurement teams at the time meant that those who used these tools and technologies were saving valuable time and hence able to benefit in terms of speed to market.
Before the pandemic, the procurement function was already undergoing a process of transformation but being forced into a live crisis dramatically sped up the process. Now, organisations have seen the immense value that the modern procurement function is able to deliver. They have also understood that this value is best able to be realised when the teams are supported by the right tools and technologies.