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?

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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:

Focus on people

Developing a new digitally-driven procurement management model that interacts with supplier base, internal consumers, and external partners in a whole new way is the need of the hour. The focus is now on the well-being of the extended workforce.

Security of the vendor base

Procurement managers need to focus on strengthening and securing their vendor base. Engagement with the tier 1 and 2 suppliers needs to be proactive to identify the risks, backlogs, and liquidity challenges. The risk strategy requires expansion and automation to suit the altered supply chain landscape.

Intelligent fund allocation

The cash crunch was very severe during the initial phases of the pandemic. Procurement leaders needed to optimize their working capital and liquidity and improve productivity by embracing advanced procurement automation technologies.

Upgrade contingency measures

Most businesses were totally unprepared for the pandemic. The gaps in the risk management plan were exposed by the pandemic. Procurement managers need to update their risk mitigation plans to ensure resilient and sustainable business operations.

Purpose-led business decisions

Innovation is a dire need in the pandemic. Businesses need to come up with innovative, purpose-based approaches to reshape their business outcomes for the better.

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:

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:

Cognitive computing and artificial intelligence

Technologies would be embraced by organizations to reduce the procurement burden.

Predictive and advanced analytics

By combining modeling, statistics, artificial intelligence, and machine learning with multiple data sources, one can predict scenarios of price fluctuations, supplier risks, etc.

Crowdsourcing

Organizations can gather large and diverse inputs to access new supply markets and use them to develop and collaborate on new products.

Wearable technology

Wearable devices can be used to note the movement of inventory.

Robotic process automation

This process can be used to automate repetitive tasks in a process workflow.

Digital is the way forward in procurement management. Reliable and intuitive workflow automation solutions like Cflow empower businesses to leverage the digitization wave. The opportunity to experience smooth and effective workflow automation is just a click away. Sign up for a 14 day free trial of Cflow to see how your business can be transformed.

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