What can we learn from the challenges of 2020 that can drive procurement teams to add value to their organizations?
Well, it's been quite an eventful year. We've gone through lockdowns, travel bans and personal protective equipment shortages. Through this disruption we've seen more resilient procurement practices emerge that give more hope for 2021.
Recently Sammeli Sammalkorpi, Sievo's CEO talked to Mark Perera, Founder and CEO of Vizibl, to get his insights and outlook for the future in a live online discussion. As a starting point, they both agreed that procurement’s main goal to drive cost savings will stay for the foreseeable future, but what needs to change is how we create and deliver additional value. This could be achieved through:
- being more flexible and agile
- driving innovation initiatives
- embracing a more sustainable agenda
- less focus on rigid processes
The current COVID crisis has developed people’s resilience and opened the door to different ways of working. We could redesign procurement structures and processes to become more responsive. In the online discussion we asked the audience an important question.
Which could be the top reinvention area for procurement in 2021?
With just under 100 answers from our audience of global procurement executives, value measurement beyond savings was ranked highest, with sustainable procurement next, and supply risk management third.
Procurement must deliver value beyond savings
This is about procurement with purpose. It means moving beyond monitoring supplier compliance to actively collaborate with suppliers on initiatives to improve environmental, social and economic impact. Mark Perera emphasized that the concept of “purpose beyond profit” will dominate the next few years and will involve adopting a more active stance towards sustainability, innovation and developing collaborative partnerships with suppliers.
“The events of 2020 have clearly demonstrated the imperative for streamlining supplier ecosystems, challenging organisations to think differently about how they collaborate and how they must change direction at a moment’s notice.”
Mark Perera, CEO of Visibl
Companies in the fast-moving-consumer-goods sector like Unilever, Vodafone and ABInbev have taken the lead, partly because they are influenced by investors and customer behaviour. These procurement teams understand the benefits that embracing sustainability goals brings to their stakeholders, employees and the communities that they serve. Sammeli suggested that other organizations could follow similar guidelines to stay competitive to achieve corporate sustainability goals. All initiatives must support the strategic direction of the organization.
Innovation and collaboration
Procurement must create opportunities to provide value beyond savings through collaborating with suppliers on continuous improvement and product innovation. Developing long-term partnerships with key suppliers and expanding channels of communication is even more important now than before the current crisis.
Sammeli asked Mark “What can we do to deliver value besides supporting the company agenda in sustainability and supplier collaboration?“. Mark answered that we must simplify some of our complex processes that have grown and become embedded over the last 20 years. The focus has been on formalizing and optimizing sourcing and P2P processes. We don’t need to be a hostage to history. Rather than polish the old model, let’s rethink it. Sammeli agreed, “We need to adopt a more purpose-driven mindset and trust people more”.
How do we promote procurement with purpose?
One outcome of the challenges of 2020 is that there is less resistance to change and more appetite for making process improvements, both by implementing new technologies and removing unnecessary manual tasks. Maybe it is time to tackle some of those big spend categories that can showcase procurement’s abilities. We can also change the language that we use to communicate with stakeholders and suppliers and become more user-friendly.
Procurement teams might need a mindset shift. We are one working part of an organization’s ecosystem where all functions are interconnected. Cross-functional teams have been around for many years and are used extensively in category sourcing. We need to expand this concept and apply it energetically to sustainability and innovation projects.
Using procurement technologies
There is a noticeable move away from the exclusive use of company-wide ERP systems towards fit-for-purpose applications that support purpose-driven initiatives. Software integration problems are becoming fewer, interfaces are getting stronger. Best of breed solutions providers are beginning to work together to provide seamless solutions for clients that produce sustainable change.
Want to hear the whole conversation? See the full discussion between Sammeli and Mark on-demand.