a strategic response to the COVID crisis
The unprecedented nature of the disruption caused by the COVID-19 pandemic has created an opportunity for the business leaders to comprehensively transform the entire procurement cycle
75 percent of companies report supply chain disruptions in some capacity due to coronavirus-related transportation restrictions, and more than 80 percent believe that their organization will experience some impact because of COVID-19 disruptions. Of those, one in six (16%) companies report adjusting revenue targets downward an average of 5.6 percent due to the coronavirus." (Source: ISM)
Most of the companies are under-invested in Procurement Capabilities
The Unprepared Procurement Function
With no documented plan, most business were left vulnerable.The last minute scramble with minimum digital foundation found an uncoordinated, inefficient and unpredictable response from procurement leaders, internal teams and suppliers.
Disconnected procurement silos visible with no team coordination and access to paper contracts, untrained to analyze and respond to high volume of queries from ecosystem of suppliers, external partners, and internal customers.
Unclear workflows, transaction focus, delegation of authority enforcement without face to face communications with stakeholders surfaced the inability to manage and mitigate risk and uncertainty with suppliers
With patchwork to the legacy systems and no quick information access, most of the leaders were unable to re-negotiate, execute contracts, apply penalties, evoke force majeure, avoid financial leakages and keep business operational.
Competent and motivated people having the requisite knowledge and skills to accept and adopt the change.
Few questions leaders should be asking?
What does my team's competency level look like?
The target skills required by the change with approach and resources to build required knowledge including identification of stakeholder groups with aptitude deficit.
How do I reward positive behavior and contribution?
Assessment of existing performance management toolkit and existing recognition program between manager to employee, employee to manager and peer to peer.
What functions can be outsourced?
Assessment of what is the core competency and what needs to be in-house to avoid financial leakages and still remain agile and efficient. The capacity realignment needs to happen with removal of non-value added work.
Is the procurement team aligned with finance and legal functions?
Your team understands and apply key financial and legal terms and how to talk that language with different stakeholders.
What about the organization structure?
Assessment of how jobs and roles relate to one another. Formal and informal structures that support or inhibit the change with approach and resources to design, build, and implement target structure
What different training is required for the impacted stakeholders?
With lot of data at hand post transformation would the teams be able to produce the output required? Foundations in procurement life cycle, analytics, negotiations, supplier relationship management, stakeholder management etc. can looked at.
Can we get sponsorship and support across organization?
Identification of the champions, advocates and support groups with a assessment on breadth of sponsorship and the associated risk that comes with it.
Are the incentives aligned?
Current incentives that support or run counter to behavior expected from change. Performance is rewarded in both monetary and non-monetary terms with approach and resources to design and implement appropriate incentives
How about performance management?
With work from home as new reality and flexibility demanded, Performance criteria and measures need to evaluated to reward the right behaviors.
Define procurement Capabilities and competencies
Define Procurement objectives
Assess current Organizational structure
Deliver the future state
Assess organization's readiness to change
Build a powerful guiding coalition with stakeholders
Proactive and segmented communication to different stakeholders
Organizational impact and workforce transition
A complicated mix of inflexible requirements, disparate processes, and functionally isolated and non-existent core activities is bound for failure.
Few questions leaders should be asking?
How to stop financial leakages?
The payment control that needs to be in place with a process improvement plan and resources to change business process, to improve effectiveness, and efficiency
How can I onboard my vendors faster and still be compliant?
Supplier on-boarding adds multiple layers of risk (operational, reputation, data security and privacy, compliance, regulatory), several internal functions (procurement, legal, IT, compliance) need to get involved to mitigate those risks. The current process needs to evaluated to eradicate all the inefficiencies and non value added work
What about different type of purchases?
Developing procurement processes and procedures to differentiate types of purchases, incorporate
proper controls and transparency, and capture end-to-end purchasing activity
How to empower and enable the decision making?
The delegation of authority needs to be designed in a way that address the efficiency required by an agile business, empowers the employees and signifies the responsibility at the right levels of organization.
Knowledge management can be another issue?
Strategies, systems, and practices to acquire, develop, retain, and distribute knowledge and insights and the processes affected by the change needs to be examined.
Will I be able to pay my vendor on time?
Decomposition of the Purchase to Pay process holistically looking at the fundamental structure from requisition generation to catalog and category management and accounts payable.
What about Procurement work flows?
With proper sponsorship modernize the procurement process by implementing next-generation procurement tools and technology to remove sequential workflows as much as possible
What could be an effective communication plan?
A well designed formal and informal communication processes and vehicles to exchange information on the changes leveraging multiple channels from Direct vs. indirect, Hierarchical vs. non-hierarchical reaching all the stakeholders.
What about purchase order usage?
The required use of purchase orders in order to establish controls, create visibility into spend commitments, and enable process efficiencies would help if avoiding financial leakages.
Account for procurement policy at the category level
Design process flow leveraging future state of technology
Create an audit capability and provide transparency
Sustainable training program
for users on the new
Streamline the procurement approval levels with payment controls
Reduce cycle time from Invoice to payment
Institute an effective process for defects and escalation
Create enterprise wide future state procurement process
Strong upstream and downstream technology is the backbone of procurement organization foundation.
Technology solutions impacting different aspects of Source to Pay cycle
Supply Risk Management
Deep understanding of the financial risk, supply side risk and demand side risk is needed to decide what kind of technology solutions can help monitor, manage and mitigate risk.
Leveraging systematic process and platform that enables organizations to efficiently collect documentation and data in order to qualify, approve, and contract vendors
Sourcing and Commodity Management
Including advanced sourcing, direct sourcing, automated supplier discovery, and commodity management to help dynamically plan and source.
That can analyze a contract portfolio for affected contracts from suppliers (and customers) for not just force majeure clauses, but other related clauses that tie to the multiple risks popping up at once in the pandemic.
That emphasizes working capital, dynamic discounting, payment control and related finance priorities to help inject cash into the P2P process
Solutions that are able to, at a minimum, help rapidly ramp up on-demand workers to deal with massive resource shortfalls.