Procurement Post-Covid: how will Covid impact procurement?

Actualizado: 14 sept 2020

How will the procurement world be impacted with Covid? Will the way we work change somehow?

No need to mention how Covid has impacted all of our lives, and how hard and challenging procurement teams have worked during Covid across the world. While very few companies were making much more money than what they could have ever imagined, the large majority have faced significant reductions to turnover. No matter whether we talk about high-street retailers, the travel industry or car manufactures, the true fact is that sales at a planetary level have decreased.

After my talks with other procurement colleagues I can summarize that during Covid we have been focused on 3 main different things:

  1. identifying the financial impact of Covid (for both sides: sales and cost)

  2. finding measures to minimise this impact: either with support from the government or negotiating with suppliers discounts or improved payment terms. My approach during Covid, has been to ensure that any loss was shared fairly between the different part because this is something that impacts everyone.

  3. identifying alternative ways of business and promoting them.

Some companies have been more successful than others, mostly depending on their speed to build remediation plans and implement them. This weird and hopefully unique situation has highlighted to weaknesses or breakthrough points that will need to be addressed in the future:

  1. deficient information

  2. agility to manoeuvre and adapt to the circumstances.

The above points will touch procurement deeply in the future. We are no longer innocents in what regards externalities and unpredictable events, and going forward we will want to keep our companies ready for any potential catastrophe. This means that we will need to care about those 2 points:

Information: understating every single cost item and the correlation with revenue is going to be key in the post-Covid world. Spend is no longer discretionary, and we need to be very mindful of all the details of every service and product we acquire as well as the impact that is has to sales. If in a specific moment, we reduce our revenue from a specific channel, we need to be able to identify the associated costs and adjust them accordingly.

Agility: the ability to shut down contracts when they are not profitable or to create new ones when there is an immediate need is going to influence the way we do business in the future. All of us have been busy reviewing Force Majeure and Breach of Service clauses those days. Speed to market with 3rd party spend is today a core topic that will influence procurement in the next years.

Over the last weeks it has no longer been about growth but about minimizing loses and this will obviously increase the role of procurement and cost management in the future. I may be wrong, but I anticipate a world were the systems and tools around cost governance and control are going to increase, and were commitments with suppliers, although they will persist, will have more flexibility in case of externalities.

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