Procurement and Supply Chain

This is a time to embrace the opportunity to rewrite the rulebook and adopt a permanent customer‑centric service model to maintain the elevated position of the supply chain function.

The value placed on an organisation's procurement and supply chain function was never more significant than at the emergence of Covid‑19. Amid global disruption, many organisations formed crisis teams to transact in new and efficient ways.

While mostly reactive, the actions taken over the last year demonstrated how agile organisations can be when necessary. The path to gaining ‘hero’ status in supply chain functions should not be brushed aside. A huge opportunity is lost by taking the stance of: “Now let's just move on and make sure that we can recover our profitability.”

Full enablement

Having weathered the storm, a savvy organisation will not reach for the rulebook but instead fully enable their supply chain to permanently pivot – continuing to evolve the way they transact and serve internal customers as they had during the pandemic.

Many procurement teams have a limited scope of influence within their organisations. They struggle to move beyond being perceived as a ‘transactional function’ that enforces rules and is simply there to purchase goods and services at a competitive price. Procurement is uniquely positioned to evolve to become a value‑adding business partner to any organisation by transforming how it delivers value.

A commonly held view within organisations – particularly within operations – is that procurement is a bottleneck, and non‑value‑adding due to its lack of customer‑centricity and slow turnaround times.

The benefits brought by procurement are often opaque as it is perceived to be a reactive, service function and not fully embedded as a holistic part of the organisation. To achieve the full benefit, procurement should instead be positioned as a proactive function serving a pivotal and evolving role in moving the organisation forward.

Open to change

Embedding processes that ensure that procurement works hand‑in‑hand with stakeholders enables organisations to collaborate with suppliers and develop solutions that capture shared benefits.

Collaborative sourcing is part of a long‑term relationship between operations and procurement, rather than a short‑term, antagonistic ‘quick fix’ – thus enabling a new business model where ‘rules’ are not fixed but open to change.

Savings focused on projections can easily trip up budget owners who may ‘unknowingly’ forgo or spend the savings as they arise. This ‘leakage’ can become a torrent if not addressed at the outset of new contracts and re‑negotiations.

Savings leakage is the result of a methodology that relies on eye‑catching figures but not correctly capturing value or factoring it into the bottom line. Procurement organisations may believe they have achieved savings, but often mistakenly have ‘calculated themselves rich’ by focusing on projected savings rather than realised savings.

Newly‑renegotiated contracts may hold the promise of significant cost savings. However, without robust processes in place that hold suppliers to contract terms and ensure no off‑contract purchasing, these savings may never reach an organisation’s bottom line.

Active mindset

It is critical to instil a continuous improvement mindset – always looking for and leveraging opportunities to positively move the dial and report true savings, thereby avoiding a deepening divide between the procurement and operations function.

We bring a portfolio of sourcing methodologies to bear, depending on the requirements of a client. While the approaches may differ, they are aligned by a no‑nonsense approach to identify, quantify and track hard‑dollar savings.

What does it mean to re‑assess your suppliers to mitigate sourcing risks? For many organisations, it is about setting out a roadmap that alleviates unpredictability to reward suppliers that adhere to clear social and environmental standards.

An overreliance on capturing savings at all costs can lead to unforeseen vulnerabilities and a sourcing approach that is reactive only when the worst has already occurred.

The momentum for strong corporate responsibility strategies is growing and involves overhauling long‑standing supply chain relationships to adopt a proactive, long‑term lens to approaching and rewarding suppliers whose practices and engagement are both ambitious and aligned.

A lack of transparency can lead to situations in which organisations quickly fall afoul of potentially damaging public relations. We believe you must dig deep to identify reputational and operational risks in the supply chain and then quickly transition to action.

A proactive approach to responsible sourcing carries the benefits of lowering potential risk while ensuring the long‑term stability of supply chains.