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Finding Value in Procurement

Girish VS, Director, ISCM
July 28, 2021

The current phase of disruption has seen what was perceived as a local supply disruption quickly morph into a global supply, demand and distribution disruption.

Businesses have survived multiple disruptions in the past. And many have not only survived, but also emerged stronger than ever. At all times procurement has stepped up to the plate – and delivered value. The current phase of disruption has seen what was perceived as a local supply disruption quickly morph into a global supply, demand and distribution disruption. And as ever, procurement teams switched to crisis management mode and helped stabilize the supply lines. But, the question is can we depend on the past models for future success?

In the past, companies focused on short term measures that generate in-year benefits. Extremely important when times are tough. But it is now time for procurement to also focus on real value – the longer term, strategic initiatives like end to end digitalization, stress testing the supply base, and building capabilities of both internal teams and of the supply base.  The difference is – today, in addition to managing profitability and conserving cash, companies face the added challenges of volatile consumer demand, changing buying behavior, changing supply-market dynamics, large scale logistics disruptions, disrupted ways of working, and managing the risks across the supply chain to make it resilient.

The Real Value in Procurement

To unlock the real value in procurement firms need to:

  1. Horizontal and Vertical Collaboration – Transform their collaboration with internal and external stakeholders to ensure an aligned procurement function. This will help companies scale up or down quickly in response to sudden supply or demand shifts. One way would be to create a special team that will step in to capture value from specific categories as these shifts happen.
  2. Address structural issues like managing lead time, harmonizing payment terms and de-risking supplier base – both in terms of supplier and geographical concentration. This will help them build resilience in their supply lines.
  3. Build trust with the business and with suppliers – the pandemic showed the importance of trust factor – there are innumerable incidences of suppliers standing by their long term customers even in the face of inducements.
  4. Accelerate adoption of digital and analytics – technology is the future. Companies need to implement an end-to-end, full scale digitalization to gain real time visibility into their supply networks. Han in hand, they need to focus on analytics to gain insights from the vast amounts of data that will flow through their system.

Companies should take this opportunity to rethink and reimagine their procurement function. The first step to finding value in procurement is to identify the highest-priority business needs and invest in the digital tools that will ensure real time visibility. It is time the companies redefine their procurement priorities and leverage technology.

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