First, I hope you are all staying healthy and safe. The last several months have exposed the numerous flaws we have in our Supply Chains. Our organizations have spent so much time and energy on building efficiency and delivering financial returns to the CFO on a quarterly basis at all costs that we have created other problems. One being a lack of resilience and agility. COVID-19 has exposed that issue and we need to jump on it, NOW.
A recent article in HBR, “Why Investing in Procurement Makes Organizations More Resilient” states, “To survive times of crisis and thrive over the long term, firms need to shift their strategic thinking from just-in-time to just in case”. The underlying theme of the article is that “What we are witnessing is an accelerated movement toward the “stakeholder economy.” This is a shift in which firms are accountable not just to shareholders but also to employees and customers, suppliers and distributors, investors, and society at large. More than ever, firms will now have to pay heed to the municipalities in which they have facilities, the environmental effects of their products, and the norms, cultures, and rights of the many communities in which they operate”. “If structured strategically, Procurement can help firms build whole constellations of value—rather than simple chains of value—in which stakeholders of all sorts are connected to one another holistically and dynamically”. Procurement is THE function that can work collaboratively across the Supply Chain to create VALUE – beyond cost savings!!!
When placed at the center of the Supply Chain, Procurement’s role is to orchestrate the interactions and collaboration with all the Supply Chain partners.
This type of structure is also essential to move to Category Management. So those organizations that are already at the Category Management stage of Maturity will certainly have a leg up in building that Supply Chain resiliency. The article presents a few case studies which are worth reading. Here are a few key take-aways:
- Long term business relationships (internal and external) built on shared visions and trust (beyond monetary results) are more resilient than ones built on transactional efficiency.
We have several clients that have been able to leverage strong internal stakeholder, customer and supplier relationships to successfully navigate through the challenges of COVID-19. Those relationship were critical in enabling them to quickly react and recover from the Supply Chain impacts.
- Building a “value creating” system that focuses on what is important to your stakeholders beyond cost. This approach by its very nature, builds a culture of “win-win” and cooperativeness that again is essential in building resiliency and cooperativeness.
Stakeholders that are treated like true partners (again internal and external) are more likely to work with Procurement in times of crisis to step up and find solutions that make both parties successful.
- Strategic Competencies that are necessary to tackle # 1 & 2 above are critical. Those competencies are Change Management, Strategic Thinking, Relationship Building, Collaboration, Communication, Consulting Skills, etc. For many Procurement organizations this is the one area where investment is required.
We have often said that people are our greatest asset in Procurement, yet professional development budgets are usually the first to be cut. If we don’t treat our people as an asset, then expecting them to be able to facilitate a resilient Supply Chain is a fool’s errand.
For months now (and years before COVID) we have been writing about the tremendous opportunity that has been presented to us. Procurement is in the unique position of being at the center of the Supply Chain and can and SHOULD step up to move from efficiency (tactical) to resiliency (strategic). Let’s use this time to demonstrate to our leaders that we are ready for this challenge. There will be more COVIDs so let’s fix this NOW!!!!
Please stay safe, let us know what you think and join in the conversation . . . . .