I previously wrote about how procurement needs less processes, as they're slow, boring and self-centered. That blog post provoked some discussions, but didn't give an answer to the question: if processes don't work, what does? Here's my view on how procurement can build their agility in a post-Covid world.
The unfolding events of 2020 have provided a serious wake-up call for procurement. No supply chain has escaped the impact of the COVID-19 pandemic. What were tried-and-tested structures and processes were found to be less than adequate in a time of crisis – they were too slow, based on pre-defined timelines, with too many checks and balances.
CPOs are painfully aware that they need to develop better resilience to be able to respond more effectively to similar future challenges. Here’s the thing: the world is becoming more unpredictable and chaotic, 2020 may be just a trailer for the future. It is time to build some agility into procurement.
What does agility mean in practice?
Historically we’ve tended to devise complex processes that could cope with most eventualities. Being proactive was regarded as best practice but it has transpired that in a volatile world a) you don’t know what is coming and b) preparing for multiple different outcomes is too costly. Procurement is an important interface with the external world and can add value to a business if it does not behave like a cost-reduction machine.
Agility in procurement means
- Being able to create and maintain situational awareness – i.e. to understand the current here-and-now based on a strong data foundation
- The ability to coordinate activities and communicate effectively and frequently both internally and with suppliers through multiple channels
- Creating an environment where people are trusted, have the mandate to act, and have the capabilities. This requires a leader who values autonomy while also being willing to accept that people make mistakes.
Situational awareness is a critical, but sometimes elusive, foundation for successful decision-making. It demands a complete, reliable, and up-to-date database, or information hub, as the basis of business knowledge. Data, when validated and converted into information, provides actionable insights and a tool for effective and fact-based communication with suppliers.
Procurement should become more data-driven and technology can be the liberator, but we are not there yet. CPOs must spend more energy on strategic priorities and less on day-to-day operations, especially now. As more routine tasks become automated, work will become less tedious freeing up staff for more “thinking” time that can add value to the business.
Rigid routines such as scheduled quarterly reviews around performance may be necessary, but they don’t build relationships. Fixed agendas do not generate collaborative solutions or innovative ideas. What we need are more frequent, less structured, even impromptu, virtual meetings that build trust and promote open discussion. Trust can only be built over time. Collaboration with suppliers is more valuable when a wider group of stakeholders is invited. These sessions cannot always be conflict-free but must be conducted respectfully and unhurriedly.
As we progress from being process-driven to becoming data-driven, our human resource needs must evolve. We need people that can tolerate uncertainty and who are adaptable in the face of rapid change. We want to leverage the unique capabilities of humans, not turn them into process machines. To attract and retain the right people we should empower them to act, offer roles with a sense of purpose and provide fluid career options within a culture of accountability. In many procurement organizations, this means a shift away from rigid hierarchies where staff are tied to cumbersome processes, formal job descriptions and limited learning opportunities.
Some processes in procurement will still be required to comply with risk reduction and governance requirements. Others can stand a review to establish if they are still valid and are not just adding layers of approvals, reviews, and more cost. We will always need to map out steps and routines before we can automate. In this context, the process is actually the tool, not the result.
Photo credit Master1305