Every year, AgileBuyer, in partnership with the French National Procurement Council (Conseil National des Achats — CNA), publishes a study entitled "Tendances et Priorités des Départements Achats" (Trends and priorities of procurement departments). The aim of this study is to establish the main areas for procurement departments to focus on in the upcoming period. Published in January, the 2021 edition highlights the impact of Covid-19 on buyer-supplier relationships in the B2B sector.
The study covers three key issues:
- Cost reduction and its renewed significance
- The continued importance of relocating supply chains
- Supplier relationships and their challenges
Cost-reduction, an objective that has declined in popularity over the past five years (with the exception of 2019), once again appears to be a priority for 77% of procurement decision makers surveyed (compared with 59% last May). This highlights the pivotal role that procurement plays in an economic crisis, which is an indirect consequence of Covid-19.
Not surprisingly, it is the sectors that have been hardest hit by the crisis in recent months that are driving this trend: the automotive, mechanical, metalworking, furniture, textile, aerospace, defence and tourism industries to name a few. However, the highest cost-reduction targets (above 10%) are found in sectors such as property, construction and finance. These sectors were also hit by the crisis, but have not yet fully activated these levers, unlike the aerospace industry, which is already under pressure.
Of course, the first criteria for assessing the performance of procurement departments is the savings made for the coming year. Interestingly, all other criteria’s are declining in popularity (contribution to turnover, responsiveness, contractual risk etc.) except for Corporate Social Responsibility. This includes establishing a sustainable procurement policy in line with the company's CSR strategy.
There is no question that the health crisis has led procurement departments to relocate their supply chains. In just one year, the number of decision makers considering moving their supply chains has almost doubled to 30%. Many of them want to relocate to France and Europe. They see this as a way of securing the supply chain, but also reducing environmental impact, improving time to market and lowering costs.
To adapt to constraints, some procurement departments rely on dual sourcing. In other words, they source the same goods or the same service from two different suppliers — one in their own or another European country and one in a low-cost country. This technique secures supply chains, while offering buyers a useful bargaining chip.
When it comes to purchases from low-cost countries, there are two opposing schools of thought. On the one hand, sectors that have been weakened by the crisis, such as aerospace and defence; mechanics and metalworking; and the automotive industry, are planning to make more purchases from these countries. However, this approach could be detrimental to the image of other industries, such as fashion, luxury goods or retail, which are therefore looking to reduce this type of purchase.
Despite the difficult circumstances, it seems that relationships between suppliers and buyers are still quite balanced. Only 39% of procurement officers feel that they have unequal and/or unfavourable relationships with certain suppliers. This is 10 points less than the previous year. Issues tend to arise in relation to raw materials—including steel and chemicals—transport, PPE and electronics. This tension most often translates into higher prices or threats of supply disruption. In addition to these relationship problems, two thirds of companies anticipate complications with deliveries from their strategic suppliers, and one third anticipate bankruptcies.
To avoid these pitfalls, procurement departments are strengthening their risk management strategies and supplier relationship monitoring. As such, three quarters of procurement decision makers say that they are focussing on supplier risk management for the coming year.
Finally, to improve supplier relationships, what could be better than a bit of friendly evaluation? In fact, more and more procurement departments are responding to satisfaction questionnaires from their suppliers. This is a great way to strengthen dialogue and mutual understanding between the parties. Jean Bouverot, Head of Procurement, Innovation and Logistics at the French Ministry of the Interior, says, "The health crisis has demonstrated that trust could almost be seen as an intangible asset!  It's the customers who were able to build on long-term loyal and trusting relationships with their suppliers—who became strategic for a time—that have come out on top".
To learn more about digitalising procurement departments, sustainable procurement, streamlining suppliers and the many other topics covered in this study, take a look at the full report here (in French).