The COVID-19 epidemic continues to weaken many of the links in the corporate value chain. That's why procurement departments have been tasked with tackling inter-company blockages and helping to create the right conditions for business recovery.
To successfully re-establish the supply chain in the long term, there are three ways that procurement departments can use the quality of their supplier relationships to their advantage:
- Secure supplies of raw materials and equipment
- Ensure the reliability of business continuity
- Temporarily establish a new way of value sharing
COVID-19 vs procurement: The supplier relationship as a means of securing supplies
With subcontractors at a standstill, international logistics systems struggling and workforces confined to their homes, maintaining—let alone increasing—production is a challenge for many companies. That's why a procurement department's ability to keep supply channels open has become vital during the COVID-19 outbreak.
From this perspective, the quality of the supplier relationship cultivated by the procurement department is fundamental. This is based on three conditions:
- The existence of a long-standing relationship of trust with each of its largest and even second-largest partners
- The commitment of those placing orders to the sustainability of its essential supply chains
- Geographical solidarity for a significant proportion of its supplies
For example, the manufacturer Alpina Savoie [1] has been able to double its pasta production using the organic wheat supply chain that it has relied on for many years. Similarly, its cardboard and plastic packaging comes from the Rhône-Alpes region.
COVID-19 vs procurement: The supplier relationship as a path to service continuity
Raw material supplies are just one of the challenges faced by procurement departments. In order to function, the supply chain must be able to count on a great number of services, for example:
- Transport
- Machine maintenance
- Facilities management services, such as catering, cleaning and security
- Indirect procurement, such as the provision of safety equipment and various consumables
For this procurement component, the quality of the supplier relationship maintained by the procurement department also has an impact on the behaviour demonstrated by partners.
Some relationships, such as those with transport and facilities management partners, are constant and flow easily. But for other stakeholders who are less visible and not used as often, relationships are more unclear. The COVID-19 crisis has highlighted the need for procurement departments to secure indirect purchases.
COVID-19 vs procurement: The supplier relationship as a new way of value sharing
Finally, the COVID-19 epidemic has illustrated a third skill that procurement departments have: the capacity for innovation in terms of value distribution.
Respectful supplier relationships and routinely building intelligent partnerships within the company's partner ecosystem are crucial in this regard.
For example, in order to produce as many artificial respirators in 50 days as it usually would in 3 years, Air Liquide successfully reinvented its supply chain [2].
To rise to this challenge and fully meet the needs of French hospitals, the company's partnership with other key players in the industry drew on the principles of war economy:
- Additional production capabilities provided by other companies
- Exchanges of engineers
- Intelligent distribution of added value
In conclusion, to overcome the COVID-19 ordeal, procurement departments should take advantage of their continued investment in supplier relationships. Indeed, inter-company solidarity is a sure-fire way to help ensure solid and sustainable business recovery.
This also demonstrates that the digital transformation of a procurement department must be used to help improve the quality of supplier relationships.
[1] Les Échos – 01/04/2020
[2] Les Échos – 31/03/2020
