Purchasing | Which opportunities for purchasing in this crisis period?

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The Covid-19 crisis has a huge economic impact on our organisations. Supply Chain and procurement strategies weaknesses have been suddenly revealed.

This crisis reduces significantly business travels possibilities abroad and even sometimes on a local scale. These strong travel restrictions for people but also on goods circulation around the world have disturbed the level of collaboration of compagnies with their client and suppliers. The winners are those able to quickly build distance work collaboration solutions. In the same way, organizations with effective purchasing services, structured in commodities with the right level of internal competences better resist to the crisis.

For others, actions must be taken in the beginning of 2021 to get back up on their feet and prepare the after-crisis. Based on best practices and recent proven innovations deployed, we have identified 4 growth levers to be activated to transform your procurement and purchasing department.

 

1. The internal structuration of purchasing services in commodities as a base to strengthen

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Procurement services must reinvent and structure themselves in categories to secure its supplies. This business segmentation is the necessary ground which allows a better harmonization of organizations and competences.

Purchasing must position itself internally as source of added value for the final customer. It is thus necessary to overcome internal silos linked to its own organization as well as creating multi-functional teams involving all compagnie value chain stakeholders, from product development to the market.

 

2. The central role of digitalisation: the example of virtual audits

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The Covid-19 crisis has an indirect but very critical consequence on supplier audits since March 2020. A lot of audits had to be postponed (to when?) or simply cancelled.

Suppliers are under pressure to re-install their pre-crisis capacity which will induce unexpected side-effects. Under which condition will they be able to restart their normal activities? Reducing quality? Non-respecting, voluntarily or not, the sanitary measures for their employees? Without visibility it is often difficult to keep suppliers performance at a good level.

Will virtual audits in the coming years gain in legitimacy? Without being able to fully replace an on-site audit, the virtual audit represents a relevant and activable alternative to keep supplier performance under control. The stake is to well define the approach of this audit, the technologies to be used (collaborative tools, embedded camera…) and the right data to collect.

This illustration shows how crucial the technological and innovation monitoring is. Because the inherent value of technology is very much linked to the environment evolution (economical, environmental, political,…).

 

3. Putting in place a long-term competitiveness plans

Short-term actions have been necessary to protect your compagnie from the crisis: partial activity plans, cutting some non-priority costs… These are many examples of necessary actions for a short term compagnie survival but not sufficient to face the new normal environment induced by the Covid-19 crisis.

In order to stand back up and be more competitive, it is necessary to launch short and long-term structuring actions. Building and deploying a competitiveness plan, a durable cost reduction plan is a good example of a lever that the company needs to activate. And it must be quickly launched! Because results of such a plan at not immediate.

A competitiveness plan is built around 4 steps:

  1. Breaking down costs structures
  2. Analysing cost saving opportunities (product design, make or buy strategy, supplier innovation…) and qualifying their impact on the product global cost
  3. Formalize related action plan to be launched internally or externally
  4. Driving the action plan implementation until targets are reached

This work must be done in a close collaboration mode together with suppliers, themselves affected by the crisis, in a trusting relationship. The definition of a common goal will create “win-win” opportunities for the compagnie and its suppliers and is a source of strengthened and future new partnerships.

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4. Developing sustainable supply chains

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The crisis period we are going through is also a real challenge for compagnies in term of CSR (Corporate Social responsibilities) which is very linked with their procurement strategy.

Compagnies already engaged in sustainable actions have been able to act quickly and in a coordinated way. It is the case when building in emergency an effective and serene social dialogue with all internal and external stakeholders (internal resources, suppliers, clients).

On the supplier side, the pandemic has revealed globalized supply chain weaknesses. Many suppliers felt in a short-term complicated situation where price, quality and lead times expectations have become impossible to align with the CSR ones. In order to improve all the chain resilience, it is in everyone interest (win-win relationship) to install solid and just partnerships, deploy at a European scale relocalisation and formalise CSR expectations.

Being more responsible is a proven source of performance in a world where sustainable development, social and political pressures are only increasing. “The licence to operate for the company of tomorrow will depend on its capacity to find a business model compatible with the limited resources of the planet”, says Fabrice Bonnifet, president of the Collège of sustainable development directors. This significant change in the economic model will constitute a new norm for sustainable development and therefore of more responsible practices for their purchasing services.

 

If disasters like the Coronavirus pandemic cannot always be anticipated, knowing the risks and seize opportunities linked with its procurement practices and suppliers give to compagnies the capacity to prepare the future while keeping their client satisfaction and employees happiness. Every cloud has a silver lining…

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