Procurement and the Supply Chain in a Time of Crisis
Last year, I wrote a blog that appeared on Procurious.com, discussing how the role of procurement has changed; how savings must now be weighed against other issues. Never has that been truer than today when the entire world is facing this expanding COVID-19 crisis. The original blog appears in part below:
“For years, procurement was stuck in the old ways of doing business. It was the role of the profession to beat down suppliers and the only consideration was cost, but the proponents of this methodology are fast becoming extinct as procurement undergoes a new evolution, While savings will always be an important element in what we do, the important question we now need to address is: what are we really trying to save?
I’ve previously spoken about how strategic sourcing in procurement can help us to change the world, but it’s easy to believe that issues like modern slavery and environmental pollution are still beyond our reach. You may think that these are buzzwords or problems too big to solve; that these are issues that are unlikely to find a solution within a single career.
But that’s not true. Every day, we’re seeing political mandates, new regulations and social pressures that are driving change at an unprecedented pace. However, the window for change to actually solve environmental issues is closing just as fast – meaning we can’t sit back and focus on cost alone if we’re really committed to making change.
Saving vs the Social Good
When we talk about optimizing our supply chains, there will never be a time where cost doesn’t form part of the conversation. Even if you’re not solely focused on cost-cutting measures, there needs to be the ability to invest in solutions that will drive positive outcomes in the years that follow – and that can’t come without the budget to back it up.
In fact, when we look at how much money we’re able to save through strategic sourcing for large multi-million dollar companies, compared with how much their net value can fluctuate on the stock market from day to day, the savings are actually negligible.
What we’re really able to do when we’re effectively reducing costs within our supply chain is reinvest that money back into the organization. This macro-level approach to cost saving lets you support the needs, beliefs, or even employees of your company to help bring about changes that will actually have an impact. Whether you’re looking for widespread industry reform or to bolster your own company initiatives, cost will always join the conversation.
Saving and the Successful Supply Chain
We counsel our customers to constantly be improving and optimizing the way their companies develop relationships with suppliers. To get the best results and a positive, long-lasting supplier relationship, there needs to be an element of a partnership between procurement professionals and their supply chain.
Good supplier relationships help to create value for both sides of the agreement – whether it’s a new product, process, or an improvement that can make everything more efficient. The key piece of supplier and vendor management that is often overlooked is the ability to be creative and innovative to help challenge the status quo.
We’ve seen that by following and developing procurement best practices, and encouraging our suppliers to think about the problem we’re trying to solve together, we can enable these things to have a bigger impact in a tangible and evident way.
What Changes the Way a Company Acts?
Not all companies are started with a social responsibility guidebook in place. The organizational stance on environmental, social, or political issues usually develops with time and as such, there is rarely a budget set aside for supporting global issues. New regulations or social pressure can both have an impact on the way a company acts. Its reaction to these pressures are either going to change the way the company is perceived – in market share or reputation – or it will change how the company will need to do business going forward.
Procurement really can make a difference, but these outcomes are best achieved when they are working and are supported by our cost-saving measures rather than being seen as the antithesis to an optimized supply chain. Sure, you can have one without the other but by reinvesting in the future of the world around us, we’ll find the best way forward.”
Where We Are Today
The blog above focused on important issues when it first appeared last year; now it almost feels prescient as more and more companies are finding themselves having to focus on so much more than dollars and cents. There are, sadly, companies that may not survive the COVID-19 pandemic; yet others have never played a more important role, along with their suppliers. They produce and supply the medicines, food, paper goods, and other essentials that enable the population to stay home and, hopefully, stay healthy. Some companies are actually changing the products they produce to meet the needs of the country and the medical community; actually retrofitting factories. Procurement must then focus on getting the materials needed for these products. This is a time when procurement and suppliers are playing a vital role for social good. We really are all in this together.
* Read my blog that discusses how procurement can help save the world.