As the economy begins to bounce back from this recent pandemic, businesses are working to reconstruct and re-examine how to drive continuous growth. Procurement plays a vital role in an organization’s continuity and its ability to increase value. Procurement teams must rethink the entire process from the basic tasks, including how it helps hire, collaborate, and effectively engage with the company. Here, we present a few elements which help in procurement’s post-pandemic recovery.
Procurement Spend Analysis
As a business returns to normal, revenue ideally begins to grow and expenses increase right along with it. Spend issues such as indirect spending which falls outside of purchasing team’s control can become a serious issue.
After the 2020 pandemic, many companies have started working remotely and are continuing, this opens the door into a visible drop in overall spending. Conducting a detailed analysis of spend habits should be the first step in preparing for a post-Covid world. Spot the specific areas of your business that account for the maximum spending and focus efforts on those areas. This will maximize the impact of the corrective actions you carry out so that you can allocate time, effort, and budget wisely. By having an advanced procurement system in place to periodically collect important data related to your company’s spend, you can gain the visibility required to manage cash and unlock value.
After identifying the spend areas, it’s time to look at the talent in your purchasing team. Take a close look at your employees’ qualifications – and fill the gaps in the current lineup with the best talent. Having employees with the right expertise as well as strong analytical and negotiation skills will make a big impact on the overall spend and the value the organization sees for it.
The procurement function needs to be connected and responsive to the needs of the entire business; it can’t function in a vacuum. As a business return to normal, cross-functional collaboration with employees who represent high spend areas becomes even more essential. When you start to rebuild, and you’re negotiating those big agreements, those decisions have a strong effect on the company’s long-term future, and they need to be made with the input of people who understand those business areas best. Make it a priority to develop your employment engagement processes in order to smooth the progress of organizational buy-in and improve spending outcomes.
Implementing a purchasing policy should be a top priority for organizations paving a path towards recovery and expansion. A procurement policy provides employees with a list of pre-approved, selected suppliers that they can purchase from and sets up the limits of authority for each employee role based on a specific amount. Putting these guidelines in practice keeps spending under control while providing flexibility and self-rule for smaller purchases.
Small and medium businesses tend to be more tightly knit and easier to oversee, but informal processes need to be replaced by formal policies as they grow. Companies must make sure their procurement policies align with the new normal, including a potentially permanent virtual work environment, in order to stay in control of costs. Key decision makers within the organization must have complete visibility into spend and budgets to mitigate risk, which can be attained through an advanced procurement software system and continuous communication.
Establishing a purchasing workflow and method of communication that is helpful to remote working allows you to manage your employees and spend, which in turn reduces the chances of costly mistakes.
An efficient purchasing process involves extensive research and background check to ensure that every vendor delivers the best value – not just the lowest cost. Conducting market, competitive, and industry research and creating a thorough screening process for vendors enables you to decrease purchasing costs and reinforce the supply chain – both are critical requirements for a company undergoing a transformation. This becomes more significant in a post-Covid world, with supply chains being highly exposed to disruption. Businesses need to have complete transparency regarding who they are buying from and even who those vendors are buying from.
In a post-Covid economy, organizations must adjust their purchasing requirements to fit the new normal. Implementing an advanced procurement system and the above-discussed elements ensure that your procurement team is ready to scale -up and meet the challenges.