The coronavirus outbreak is demanding rapid changes in short and long term strategy for businesses across the globe. This week Vizibl spoke with a Fortune 500 Procurement Executive on Covid-19’s impact on procurement and how these effects may affect the function’s future.
Supplier Risk Management: Procurement must identify the suppliers that pose a risk to the company. It is important that critical suppliers are assessed and approached for honest conversations in which potential risks are identified. Once identified, buyer and supplier must work together to mitigate risks, through interventions and increased flexibility to payment & contract terms.
Helping Tackle Coronavirus: Companies have an important role to play in order to help mitigate the short term impact of Covid-19. Some companies around the world are working hard to manufacture and provide Protective Personal Equipment (PPE) at a national and international scale. Procurement functions play a crucial role in working with suppliers to deliver on these initiatives.
Guarantee Remote Work: In under a month, companies around the world have transitioned an office to remote working. Small businesses and startups are coping well as they are relatively simple and agile. However, bigger corporates may not have been ready for such a quick change. Procurement is also key in order to ensure that the business can still function efficiently, working closely with IT to provide the required technology, software and communication tools.
Supplier Collaboration & Innovation: Suppliers are a key pillar to the success of a company. COVID-19 highlights the importance of having a clear, solid relationship with critical and strategic suppliers. Developing an SC&I initiative for the future can help businesses build strong relationships with suppliers. By establishing proper governance and communication processes, the company can be better prepared for future issues that put the entire business at risk. By improving supplier relationships, buyers become customers of choice for suppliers, creating strong partnerships.
Improve Vendor On-boarding: Companies have had to fast track the on-boarding of new suppliers due to the urgency of the situation, highlighting the complexity and inefficiency of current vendor on-boarding processes. It is imperative that Procurement teams create leaner processes (compliance, finance, contracts, risk management…) to onboard new suppliers faster and in a smarter way.
Become more relevant internally: Procurement should become a more relevant function for the entire business. This is an opportunity to get closer to the business and prove its value and potential to become a partner for the business, not a service.
Cost Reduction: Cost reduction will be key in the mid-long term for every company. Procurement will be asked to bring costs down in order to impact the overall financial performance. This will also be an opportunity for procurement to improve P&L processes and add new services in order to make them more efficient.