It is not an exaggeration to say that COVID-19 has brought businesses and the global economy to an unprecedented standstill. While we have witnessed communities willing to change their behaviors during this major outbreak to help save lives, some industries have faced a sudden drop in demand for their goods or services.
Of course, not all industries have been affected in the same way. On one side of the spectrum, we have seen industries experience a sharp decline in demand almost overnight, such as hospitality and transportation. On the other side, certain industries have faced overwhelming and sudden demand, such as the production of PPE, pharmaceuticals, medical supplies, and public services. This does not mean that businesses situated between these extremes are exempt from the need to adapt their operations, adjust production lines, or reshape service models to respond to changing consumer behaviors, such as retail or financial services.
Like many major challenges, this situation also presents opportunities for forward-thinking businesses. The key to thriving in this crisis lies in an organization’s ability to deliver products efficiently. Procurement and supply chain management are central to this, and above all, the teams overseeing these functions must step up as leaders and embrace innovation.
Why Procurement Must Take the Lead
Procurement serves as a critical bridge between third-party suppliers and the various functions of a business. When consumer demand becomes unpredictable, businesses turn to procurement teams for guidance on new product concepts that require materials, services, and even innovations from external partners. Similarly, during market disruptions, procurement teams face the challenge of ensuring a continuous supply. The ability to secure and maintain connections with suppliers faster than competitors becomes a crucial differentiator between industry leaders and followers.
Embracing Innovation to Increase Procurement Agility
During times of business innovation, procurement teams do not need to invent everything from scratch. They can leverage tried-and-tested techniques and approaches—but execute them faster.
– Category Management: When a business needs materials or products quickly, procurement can implement proven processes and frameworks to ensure rapid and confident operations.
– Source and Spend Management: Establish clear steps for sourcing materials or products and managing expenditures across business units.
– Make or Buy Decisions: If a necessary product or service cannot be procured in time, procurement may need to assess whether the organization can produce it internally or source it from alternative suppliers, such as universities or even direct competitors.
– Expanding Supplier Options: Consider sources beyond existing suppliers to ensure flexibility and reduce dependency.
– Supplier Relationship Management (SRM): Facilitate communication with business partners and third-party suppliers to promote collaboration, establish creative engagement practices, and track the progress of supplier relationships.
– Key Supplier Focus: Identify critical suppliers and determine how to strengthen these relationships. Explore how innovation can maximize the value of external partnerships.
– Risk Assessment: Rapid sourcing during volatile periods requires frequent and detailed risk analysis to ensure that at-risk suppliers are managed, supported, or replaced before disruptions impact operations.
How to Assess Supplier Risk and How Often
Procurement must embrace challenges with confidence in its methods and capabilities. By demonstrating leadership through cross-functional collaboration and innovative approaches to increase agility, procurement can play a decisive role in helping the organization navigate uncertainty and thrive despite disruption.
