As we approach the end of 2020, it’s the right time for procurement professionals to reflect on the challenges of the past year and ready themselves for a successful 2021.
COVID-19 has transformed business priorities and created a whole new set of challenges for procurement. To best support the organisation at large, the profession must learn from the supply chain disruptions experienced in recent months and put measures in place to prepare for the coming year as best they can.
Here are seven ways procurement teams can prepare for success in 2021.
1. Secure supply lines
A successful 2021 will see procurement professionals prioritising supply chain security over cost savings.
Throughout 2020, supply chains across the globe have suffered from bottlenecking and stock-outs, thanks to the disruption caused by coronavirus. The profession must move away from a reliance on single-source suppliers and reassess their just-in-time (JIT) supply chains to ensure surges in consumer demand can be accommodated.
Risk mitigation tactics might include reshoring, onshoring, dual-sourcing, holding buffer stocks, network optimisation, and aggregated sourcing.
2. Adopt agile procurement practices
In the post-pandemic world, business leaders working to steer their organisation through an impending recession will demand increased efficiency from procurement.
Agile procurement practices, which include sprints, SCRUM’s stand-ups, and big room workshops will help balance the risk of speedy sourcing with clumsy shortcuts in due diligence and risk management.
PASA offers a training course on Lean Agile Procurement. Find out more and register for the November/December course dates here.
3. Reduce non-essential spend
In the early stages of the pandemic, many organisations paused non-essential supply lines in a bid to preserve cash and limit superfluous stock and services.
But as the world slowly adapts to a “new normal”, which includes a shift to remote working and a major reduction in business travel, much of the supply chain will remain non-essential. Procurement professionals will need to analyse their organisations’ cyclical spend and look at areas within the business where variable cost labour (contract workers) can be used.
4. Minimise fixed costs
Procurement will need to evaluate existing business models to minimise fixed costs in favour of variable costs. This will include securing variable-pricing agreements with suppliers, such as surplus stock buy-backs, shared impress stock, and price breaks, to shift risk away from procurement and onto the supplier.
5. Improve spend visibility
COVID-19 has exposed procurement teams whose data analysis processes are lacking. Despite investments in ERP and P2P systems, many organisations have struggled to quickly extract crucial information throughout this crisis, such as which of their suppliers are the most critical.
Moving forward, procurement will need to map supply chains to achieve better spend visibility and secure supply lines.
6. Re-evaluate supplier segmentation
Supplier segmentation typically refers to the process of highlighting suppliers that have the greatest impact on the organisation and pose the biggest risk, enabling procurement teams to allocate their resources most effectively.
An alternate approach to supplier segmentation sees procurement divide its supply base into essential and non-essential suppliers – a distinction that will continue to prove useful post-pandemic. Now more than ever, procurement professionals need to focus on SRM and communicate the value of close working relationships to the C-suite.
With the prospect of continued disruption as we head into 2021, implementing an effective supplier segmentation programme could be the difference between keeping the supply chain moving or not.
7. Negotiate robust contracts
There is nothing like a major supply chain disruption to draw procurement’s attention to deficient contracting. Amid the pandemic, countless procurement teams discovered that many of their contracts lacked a force majeure clause.
Let 2021 be the year that procurement teams closely review all existing supplier contracts and ensure the worst possible scenarios are acknowledged and accounted for – however unlikely they may be. This might extend to creating new contract templates and implementing contract automation systems.
To read more, download Jonathan Dutton’s white-paper – The 7 Key Challenges For Procurement Success In The Post Covid World.