New procurement practices in response to COVID-19

Procurement ; COVID-19
April 2nd, 2020
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COVID-19 has shown that "procurement crises" can happen, just like "medical crises".

New priorities have emerged as a result of the COVID-19 outbreak. In light of this, procurement departments are encouraged to focus first and foremost on the following three areas:

Improving the data processing capacity of procurement departments in response to COVID-19

Regardless of whether the COVID-19 pandemic is perceived as a global crisis or as causing widespread systemic disruption to the supply chain, it has been a major wake-up call for procurement departments.

The likely implications of the initial difficulties encountered in Asia had to be identified as quickly as possible, and the practical consequences of these understood.

Organisations with advanced information systems are at an advantage here, as they are able to analyse large amounts of data in real time:

  • Accurate and comprehensive mapping of tier 1 and tier 2 suppliers
  • Immediate identification of the products and volumes impacted
  • Understanding of logistics channels and planning of transloading operations
  • Visualisation of value chains and identification of bottlenecks 

Improving the agility of procurement departments in response to COVID-19

For procurement departments, the second challenge to have emerged from the COVID-19 crisis is the speed at which bypass strategies have been implemented.

There are two aspects to ensuring business continuity:

  • Suppliers who are either partially or completely unavailable for deliveries need to be replaced.
  • Sourcing needs to be opened up to supply equipment and components that are not covered by the existing supplier base.

Whether or not a company-wide business continuity plan is in place clearly plays a role in the responsiveness of procurement departments.

However, the agility of a department's processes is the most important factor:

  • Access to cloud-based e-procurement applications has proved crucial in maintaining performance across the board while working remotely.
  • Operational maintenance of an alternative supplier base.
  • Traceability of component stocks and semi-finished products to define collaborative cross-site strategies.
  • Ability to speed up the listing process without compromising safety.

Improving the efficiency of procurement departments as a collective in response to COVID-19

Finally, procurement departments are faced with practical challenges that form the foundation of their supplier relationships.

Shortages at all levels (labour, transportation, raw materials, services) and government orders are forcing each economic player to make trade-offs. Furthermore, this often changes day-to-day, as the situation develops.

In this struggle to access the capabilities and services that are essential to the supply chain, companies whose procurement departments have built trusted relationships with their suppliers over the years have a clear advantage.

Similarly, organisations that are involved in programmes with their partners to innovate and continuously improve the value chain for the benefit of all parties, are seeing their position strengthened during the crisis. 

In conclusion, the immediate lessons for procurement departments in light of COVID-19 go hand-in-hand with the digital transformation that has been underway for the last few years.

However, the consequences of the pandemic also remind us that virtual resources can only be used to their full extent if strong, sustainable relationships exist with strategic partners. 

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