The Procurement role in Crisis management

The COVID-19 crisis is affecting the entire business community. Companies around the world are adopting measures aimed at mitigating the damage caused to their businesses. One of the key figures for this crisis management is the Procurement leader.

In this article, you will find the action guidelines Procurement leaders are adopting in crisis management and their future vision as facilitators of the recovery process towards a new normality from Deloitte’s perspective.

The Procurement role in Crisis Management

Supply chain management is a complex challenge and the Procurement area plays a critical role in the recovery: Procurement’s role is fundamental for the proper management of suppliers and their impact on business.

The current situation forces Procurement leaders to make decisions at the highest level, coordinating with the rest of the strategic functions, in order to align two of its main objectives with the current strategic business priorities:

• To guarantee critical supply so that itcontinues operating
• To optimize or rationalize costs

With regard to the first objective, Procurement teams must work with methodology and rigor, taking into consideration the most appropriate strategies within their scope of action, the global vision of the supplier and its relationship with the critical categories and families of the value chain. They must do so while focusing particularly on the management of associated risks, not just at the very beginning, but also in the longer term. From now on, our key suppliers will be considered, more than ever, our business partners, helping both to accelerate the ramp-up curve and to detect market trends to be incorporated into the innovation cycle. Technology has also taken on an essential dimension and only those companies with a mature level of digitalization are currently able to adequately manage their relationship with the companies that supply them with goods or services that feed the value chain.

In relation to the second objective, it is not just coordination with production areas to adapt supply to demand that becomes important, but also financial solvency, which is one of the greatest concerns at the moment. In this sense, coordination with the CFO in treasury and cash preservation plans is tremendously important. Although most companies are naturally streamlining costs in some of their categories due to falling consumption, other families may also be subject to optimization. In order to identify these families, a strategic, highly mature Procurement role is necessary, allowing a clear image to be obtained of both the scope and potential actions. It is time to analyze expenses in depth, trimming what really needs to be trimmed: if extreme precision is not implemented, the growth curve will be burdened and output will be weakened.

Future vision

It will be Procurement’s responsibility, in order to push the recovery towards the new normality, to lead the structural changes in the supply base through excellence in supplier management. With the increasing pressure, as a function positioned in the companies' strategy and enabled by technology, it should be possible to attract external value and ensure the viability of the supply chain through suppliers acting as true business partners.