Covid has been the architect of much change, and it has most definitely altered the face of procurement forever.
As a result of Covid-19 supply chains the world over have suffered a real shock. For the public sector, the fragility of supply chain and procurement initiatives, and our growing dependence upon global supply has exposed weaknesses in long-standing ways of working.
Now, as we prepare for the post-COVID world, supply chain and procurement professionals across the APS are taking the lessons learned from the last 18 months and are looking for new ways to work smarter, better, and more efficiently.
Recognising the need to drive innovation, pivot supply networks and build resilience, APS procurement leaders – those tasked with keeping our hospitals and quarantine facilities stocked with PPE, those ensuring educational facilities remain open, and those keeping our transport, logistics and supply networks operational and safe – are looking to optimise the value of procurement initiatives.
Below we’ve rounded up five strategies helping procurement leaders reimagine procurement and supply in the new normal through proactive, innovative and technologically-led approaches.
As supply chains become more global and interconnected, they face a growing range of challenges, including climate change, the rise of a multipolar economic system, added geopolitical risks, and of course, we can’t forget to mention, global pandemics. According to McKinsey, “in the past several years, at least one company in twenty has suffered a supply-chain disruption costing at least $100 million.”
As the dust settles and we begin to emerge from the other side of pandemic the time is now to shift from an adhoc ‘respond and recover’ strategy to a proactive procurement strategy that drives resilience.
Through transparency procurement leaders can gain holistic oversight of their next-tier suppliers and value chains, and through business-continuity planning contingencies can be designed not just for a single supplier plant to go offline, but for entire countries to be inaccessible. Both Deloitte and McKinsey have suggested war game–like simulations of possible supply-chain disruptions to uncover hidden vulnerabilities and built flexibility.
I’m sure you all recall the great ‘toilet paper turmoil’ of March 2020 when hoarding was at its peak and manufacturing leaders had to publicaly announce that Australia wouldn’t run out of loo roll as we produced it here?
Needless to say COVID-19 has raised endless questions about the future of procurement and the way organisations run their supply chains. To better mitigate risk and avoid major disruptions we’re now seeing an emphasis on buying local.
According to Procurement and Supply Australasia buying local offers a number of benefits including:
- Boosting the Australian economy
- Research shows that the economic multiplier from buying local is four times higher than buying from a non-local source. According to the Australian Made campaign, $333, 900 worth of tax revenue is made and 10 full-time jobs are created for every $1 million invested in domestic manufacturing.
- More meaningful supplier relationships
- Building long-lasting and meaningful relationships with local suppliers is much easier. Negotiations can take place in person, buyers are more likely to receive a personalised service, and any issues or queries can be quickly resolved because everyone is in the same time zone.
- Reduced supply chain costs
- Within complex, global supply chains, logistics costs can be staggeringly high. Consolidating the supply chain with a focus on localisation is a great way to reduce procurement’s spend without having to cut corners on important factors such as sustainability.
Across the board – whether in the private or public sectors – operators are moving their data to the cloud faster than ever in response to the business challenges raised by the COVID-19 pandemic. In fact, according to new research by Centrify and Censuswide, the global pandemic has accelerated cloud transformation for nearly half of organisations.
In the procurement space cloud-based contract lifecycle management solutions offer significant benefits. Access to a centralised and automated contract repository hosted in a secure cloud environment provides organisations with complete contract visibility, eliminating wasted work hours and improving efficiency.
Further, the acceleration toward the cloud opens many doors for organisations and in terms of managing contract data, they are finding immense value when applying it to intelligent contract management solutions during this critical economic environment.
Contracting and supplier management plays a significant role within the context of a department’s procurement efforts, with organisations that have clearly defined contract compliance processes achieving greater cost savings, reducing the time and costs associated with auditing supplier compliance and maintaining strong supplier relationships.
Even if your department or organisation has been successful in mitigating risks and delays caused by Covid-19, a reassessment of longstanding contracts and SRM frameworks is key to maintaining effective operations in 2021 and beyond.
Good suppliers (and good supplier relationships) allow your business to thrive and increase its profitability. Inefficient or unreliable suppliers, on the other hand, can cost you money – and, potentially even worse, your reputation too. In the public sector, where taxpayer dollars and scrutiny come into play effectively managing this is integral.
A silver lining of the disruption caused over the last 12-18 months is that the C-suite has finally recognised the integral role that procurement plays in smooth business operations. CPOs now have a bigger seat at the boardroom table, and a much larger share of voice in critical decision-making.
From an executive perspective procurement, along with other back office functions are cost centres, rarely generating ROI or resulting in innovation.
By redesigning processes and workflows there now exists an opportunity however to make procurement a smarter, more analytical business enabled function which can provide counsel and technically advanced implementation advice to mitigate or prevent losses, produce tangible savings in comparison to outsourcing or contracting outside and to develop sustainable capability and bespoke knowledge.
To learn more about how to reimagine procurement in the new normal, and to explore first hand insights from government procurement leaders join us on July 21st at the Australian edition of the Procurement Transformation virtual event. Learn more or register your free webinar ticket here.