We asked 49 procurement teams how their focus has changed during COVID. Here is what they said.
What a different world this is! Just three months ago we published our research on what the focus of procurement teams should be. Now we need to start from scratch as the COVID-19 pandemic rewrites the rules of business around the world.
In April 2020, we surveyed 49 Australian procurement teams to understand how their work has changed. We will repeat this in August and November of this year to understand the long-term impacts. But for now, we want to share with you our first findings.
Now is the time for procurement to shine!
For every second business (56%), procurement has currently a more positive impact than usual. And for an additional 33% procurement has become critical to the success of the business. The message is clear: now is the time for procurement to shine.
The focus is clearly on reducing supply risk
Reducing supply risk is the top priority for 40% of procurement teams in April 2020 (refer Figure 1). That’s up from 6% just three months ago! Conversely, the importance of reducing cost has halved from 29% to 15%. But even cost reduction remains the second most important area for procurement teams.
If I had a crystal ball, I would predict that over the coming months the priorities will be reversed again: cost reduction overtaking supply risk mitigation. Once the immediate crisis response has passed and supply chains are made resilient, Australian organisations will shift to reducing their longer-term cost base to make up for lost revenue and to secure their own future.
Figure 1: The focus of procurement teams in 2019 and in 2020: Supply risk mitigation is key, but the eye remains on cost reduction
Other areas have become less important for procurement. While sustainable and social outcomes were already right at the bottom of the list in 2019, their relative importance has further waned – despite all the PR around their importance. Other areas also had a reduction in attention, including the value for the external customer and improving the way the business operates. This is dangerous territory. From our previous research, we know that both are amongst the top three areas where the rest of the business expects procurement to deliver value. So, procurement must carefully consider at what point the immediate crisis response is over and the long term value building restarts.
What’s the long-term outlook here?
Understandably the focus of procurement has shifted to immediate crisis control. 40% of procurement teams focus on mitigating supply risks. We see that cost reduction remains important and predict its importance will increase over the coming months and years. But procurement teams also need to keep in mind that the rest of the business expects procurement to generate long term value through improving the way the business operates and delivering value for the end customer. Those areas are currently less of a focus, but procurement must not miss the timing to revert back to them once the immediate crisis response is over.
Our research is still ongoing. We would love your insights, so please participate in our 5-minute survey now to receive a free copy of the full report later this year: https://www.surveymonkey.com/r/ProcurementAndCOVID