Procurement Management in the New Normal
Hello! Welcome to the new normal or should I say COVID 19 Era. From supply chain disruptions to mass layoffs to Economic downturns, the COVID pandemic has altered the way businesses function. Has your procurement management plan got your business covered for the Global Pandemic?
Procurement Management – What Has Changed?
To say that the COVID pandemic has disrupted the procurement management function would be a mild way of explaining the pandemic effect on the global supply chain. Procurement teams are expected to maintain business operations, cater to ad-hoc demands, and manage vendor challenges against a severe disruption of the supply chain.
The initial focus of procurement managers was to manage upstream supply interruptions from tier 1 and tier 2 vendors. Short-term supply decisions for managing supply network constraints were a top priority during the initial stages of the pandemic. The focus is now slowly shifting to ensuring the medium-term safety of the supply network. Procurement managers are currently focusing on judicious use of funds and building sustainable resources for the future.
Key Areas in Procurement Management
Key areas in procurement management that need a renewed focus in the wake of the pandemic are:
Even the boldest procurement leaders were tested by the pandemic. Never has the role of a CPO been so vital in business operations.
Comprehensive Procurement Management Planning
Procurement leaders are constantly asked to plan for cost reduction and impacting the business bottom line. A comprehensive procurement management plan is required for the optimal procurement of products and services. A well-structured approach to procurement management empowers procurement leaders to mitigate risk and impact the business bottom line.
A procurement management plan must cover the following aspects:
01
Forecast
The future demand for products and services must be the basis for the procurement plan.
02
Market Research and Analysis
Thorough market research and analysis must be performed for each commodity. The analysis is performed to determine supply and demand trends.
03
Buying approach
The approach adopted to procure the commodities must be given in the form of clear instructions.
04
Resources
The people and other resources involved in procuring the commodity must be mentioned in the plan.
05
Past spends
A spend profile is created to include the past expenses on each commodity.
06
Cost reduction techniques
The various techniques adopted to minimize spend must be mentioned in the plan.
07
Savings
A rough estimate of the savings that can be achieved by applying the above cost-cutting techniques is mentioned here.
08
Future Spend
Projecting future spend on the commodity based on the change in market demand should be included in the plan.
The procurement management plan must be aligned to the organization’s corporate strategy.
Digital Technology and Procurement Management
The procurement management function is being redefined by advanced digital technologies. The use of digital technology in procurement management is rapidly altering this function.
Digital procurement solutions are impacting the procurement function in the following ways:
- More predictive strategic sourcing
- Automation of transactional procurement
- Proactive buyer-supplier relationships-
- Access to structured data sets that were previously unavailable
- Digitally enabled spend categories and markets
Future of Procurement in the Age of Digital Supply Networks
The article “Future of Procurement in the Age of Digital Supply Networks” by Deloitte discusses the digital procurement solutions and capabilities that are shaping the future of procurement management.
Here is a brief of digital technologies shaping the future of procurement management:
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