Eight best practices to help procurement departments prepare for the aftermath of COVID-19

covid-19 ; procurement department
April 29th, 2020
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The coronavirus is wreaking havoc across supply chains, the economy and the stock markets. This health crisis has hinted at an unprecedented economic crisis in the future, the scale of which is yet to be seen. Businesses and procurement departments are preparing for it. Almost half have already adjusted their budgets, put in place emergency plans, or both [1]. In its report "Preparing the Company for Extreme Economic Volatility", the Hackett Group suggests eight best practices for procurement, both long-term and short-term, to help prepare for the situation.

Best short-term practices for COVID-19

1) Prepare for the worst

To start with, it is important to identify goods that could be subject to delivery delays or shortages, as well as increasing safety stocks of these items where possible.

2. Line up alternative sources

In order to secure supplies, we must maintain dialogue and follow up with suppliers, especially if they are our critical suppliers. Equally, we need to identify suppliers in high-risk areas. To prepare for any critical situation, creating a risk-management programme and lining up secondary sources of supply is vital.

3. Reduce costs in an intelligent way

If demand falls, companies need to reduce their costs. Procurement departments have a key role to play here, but they need to be smart about it. A good approach would be to work with suppliers to find intelligent solutions, such as adopting alternative products, reviewing certain processes etc.

Best long-term practices for COVID-19

4. Adopt an agile mindset to planning

Procurement departments have much to gain from a more agile structure. To achieve this, they need to anticipate—and even predict—market developments, carry out ongoing risk planning of their key suppliers and provide fast solutions that are quick to implement.

5. Develop a risk-management programme

To prepare for the future, it is important to create a solid risk management programme, to ensure a secondary source of supply for essential products and services, and to develop a programme to quickly integrate these new potential suppliers.

6. Invest in cost-cutting technology

Thanks to advanced analysis solutions, procurement departments can assess the costs associated with all of their processes and their overall performance to optimise (or eliminate) costly tasks with low added value.

7. Adopt smart automation technologies

By taking full advantage of the capabilities of automation platforms and solutions (such as RPA, visualisation, conversational interfaces etc.), procurement departments could cut costs by 17%. These technologies seem particularly suitable in times of crisis because they help to both reduce costs and increase agility.

8. Migrate certain activities to shared service centres and global business services

These shared service centres unite all back-office functions for a certain geographical area within a single team in order to manage them in a consistent and standardised way. This type of structure is a real driver of performance for a company and can help achieve economies of scale, improve control and standardise these activities.

In such uncertain times, procurement departments must be ready to support their companies in intelligent cost reduction and risk management. To do this, they will need to leverage their supplier relationships and digital solutions, while optimising resources.


[1] Key Issues Study, The Hackett Group, 2020

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