2020 has been tough. And if your profession happens to be Procurement transformation, it’s likely – in the workplace, at least – it’s been even more so. A business fighting for survival will always look at its overhead, often meaning the threat of redundancy. In parallel, it will also look at its expenditure meaning it is frequently the case that the Procurement function will be asked to commit incremental cost reduction to that which has already been budgeted, without the luxury of knowing its method of delivery. A smart Procurement Director may even pro-actively offer up a greater level of cost reduction before being challenged, as a means to protect their people. What emerges provides Procurement functions with an unlikely platform to excel, distinguish themselves, and to add value to the bottom line.
Necessity is the mother of invention, or so the old saying goes. And it is particularly relevant in moments such as these. Initiatives long championed by the Procurement function, and previously met with a litany of business objections, are now met with ready ears. As contrary as it may sound, cost transformation can thrive most when the sun isn’t shining. It will involve accessing both immediate gains, and engraining a revised methodology across business for the future. Not just any port in a storm, but a new route to be navigated as standard. Unnecessary expenditure will be cut. Existing contracts must be revisited and renegotiated – it is often the fastest route to saving money. But there is a care point here. If the supply partner in question has attracted a wealth of spend, or operates in a sector with few alternatives or high barriers to entry, the Procurement function must ensure that they survive, too. Now is critical, but once we get there, the future will be, too. As a result, cost transformation values the involvement and development of supplier relationships, to collaboratively drive down costs. A benefit to both, and a sustainable future for all.
Uncertain business outlooks shine a spotlight into every function. The right digital procurement technology can centralise spend data, identify trends and compliance to metrics, pinpoint opportunities, and simplify supply chain decisions as a result. All crucial components when knowing exactly where you are, and where you want to be. Additionally, digital tools can manage this process quickly, paving the way for procurement personnel to move from analysis into enactment of their strategic work, with an agility that the situation demands.
The data available to Procurement functions from digital software can also be advantageous to other business areas. Cost trends associated with a particular product or technology may inform future product development strategies, or outline the focussed trend of an industry or the competition. The positive impact of Procurement software can be felt by those that plan, too.
A legacy of 2020 will be confirmation, if we didn’t know it before, that senior business managers and Procurement leads must both know their risks, and how they are protected against them. Risk management strategies encourage forward thinking, and the ability to react. It is this blend of skills that delivers longer term security, but also identifies immediate benefits too. In volatile market circumstances, it might be that selective expenditure is a worthwhile insurance, and good business sense. A business built on adding value to imports, for instance, will fear the reported risk of delay at seaports. Contracted airfreight capacity – so often an option chosen through gritted teeth – may suddenly appear a pragmatic safeguarding investment.
Risk is also present in the futures of your people. Uncertainty breeds revised outlooks and potentially, a knock-on effect to the vast creativity within the workforce. It is too wasteful to allow this mindset to manifest itself, even more so when people will often be re-tasked in response to the prevailing conditions. The costs to continue the development and upskilling of individuals will quickly be offset by the heightened engagement and creativity that those people will demonstrate within their work as a result – protecting training investment will reap reward.
In a year of challenge, the focus for Procurement departments to find sustainable cost reduction solutions has resulted in the opportunity to emerge from the ordinary; reinvigorating working practices through collaboration, innovation and greater strategic thinking. This transformation in both culture and practice now provides a platform for progress, a moment to take hold of, with the opportunity to thrive not merely survive.