COVID-19: A Wake-up Call for Innovative Procurement
“We cannot solve our problems with the same thinking we used when we created them” ~ Albert Einstein
Innovation is a key component of successful procurement, which is the cornerstone for any organization’s success and ensuring business continuity during difficult times. Often organizations worldwide are subjected to supply chain disruptions due to unforeseen circumstances. The latest being the pandemic COVID-19.
In the last week of December 2019, China’s manufacturing hub Wuhan started getting crippled by Coronavirus Disease 2019 (COVID-19), an infectious disease caused by Severe Acute Respiratory Syndrome Coronavirus 2 (SARS-CoV-2). Since then, it has been transmitted worldwide, resulting in a global panic reaction that has paralyzed, crunched, and disrupted the global economy.
In such trouble times, procurement teams often look forward to adopting cost-cutting measures on indirect spend to combat the impact of a global meltdown. However, as per recent research by The Hackett Group, top-performing organizations recognize that a strong relationship between the procurement team and business partners enables significant spend influence.
Thus, procurement teams should step up and take the lead in providing strategic insights and steering the organization through this black swan event by adopting innovative procurement.
Here are three ways procurement can be a valued advisor and mitigate the risks due to the COVID-19 outbreak:
- Provide insights to the C-Suite for business continuity
During a pandemic situation, your C-Level executives are looking for assistance in framing contingency plans to avoid supply chain risks, to ensure business continuity. With innovative procurement tools, best-in-class procurement departments can achieve compliant spending as per newly defined budgets and curb off budgeted spends.
- Support business partners to reprioritize spend
Business functions in an organization need support from procurement in renegotiating contract terms with existing suppliers. It is to reprioritize their spend and to ensure that business revenue doesn’t take much of a hit.
“Force majeure” is a legal term commonly buried in a business contract that offers the parties a potential escape clause.
With the advancement of procurement technology, the team can leverage Artificial Intelligence to scan several business contracts and identify Force Majeure or termination clauses in those contracts for re-negotiation.
- Mitigate supplier risk and foster long term relationship with critical suppliers
An ongoing risk-monitoring program with a focus on building supply chain resilience is a standard practice in best-in-class procurement departments. It helps in predicting the risk and provides insights based on which the team can build on a resilient verified supplier base.
Your suppliers would be willing to provide service if they are aware of how their service with your organization would impact their cash flow. Top-performing procurement teams, leverage supplier portals to provide visibility to their suppliers into the issued purchased orders and their corresponding payment status, thereby fostering supplier relationships.
Supply chain disruptions are unpredictable, and the COVID outbreak calls for re-strategizing & optimizing procurement operations innovatively with intelligent automation.