The need for procurement agility in the next phase of recovery
COVID-19 Managing the Restart: The need for procurement agility in the next phase of recovery
As global lockdowns ease and economies begin to recover, businesses face new challenges and procurement functions will need to apply a wide range of strategies to navigate the next phase successfully.
We recently undertook a survey of over 200 senior procurement and finance leaders which examined the effect of the Covid-19 pandemic, immediate responses to the crisis, and strategies for the recovery. The results were insightful, and we have highlighted a timeline of challenges that will need to be addressed as economies unfreeze and businesses restart.
Restart will not be simple.
With complex, multi-national supply chains, the effect of different countries’ policies will cause ongoing supply difficulties. In the short term; potential further waves of lockdowns, even internationally, could cause further waves of disruption.
Credit and cash will cause friction in supply chains as every link in the supply chain conserves cash. Supplier liquidity problems and supplier insolvencies are a concern to nearly all procurement leaders.
Critically, the most common challenge foreseen by procurement leaders is cost inflation. Inflationary pressure is highlighted over and over, in raw materials, through exchange rates, in transportation (despite the oil price being at an all-time low) and manifesting in supplier price increase requests.
Our view is that agility will be the most important procurement capability in the near-term.
Procurement agility in the next phase of recovery: Four tactics to consider
- Be able to spot-buy from a range of sources… To take advantage of availability and price… and to mitigate risk.
- De-couple supply from logistics... be able to use alternative logistics providers and alternative routes
- Avoid commitment… to volumes or to contracts
- Be able to trade “financially”. Payment terms will be a strong hand in negotiations. Cash is king.
The way that procurement functions navigate the road to recovery will have a big impact on whether their companies are fit to face the future.
In this article, we examine how procurement teams can tackle the various phases of recovery, and take the opportunity to adjust their cost base, reposition their supply chains and add future value to the bottom line.
In the recovery from Covid-19, Procurement Excellence will be a significant competitive advantage.
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