Strategic Sourcing: An essential strategy enabler

As the World struggled to adjust from the effect of the Covid-19 pandemic, corporates and governments, where gripped in redefining their value propositions to customers and citizens alike. The economic devastation left by the Pandemic fallout, have eroded any sense of loyalty that corporates and governments may have enjoyed prior to the Global catastrophe. 

Transformation strategies are greatly influenced by accelerating digital migration, cost-reduction, value-chain re-assessments, re-defining offerings, and services, and establishing new strategic partnerships in non-traditional markets. It is safe to say the business-as-usual that existed pre-pandemic, is for now, something never to be returned to. Change has become constant, and this effects the way in which organizations must view the importance of their procurement function. 

Traditionally, this function was tasked to act as a retrospective contracting and spending gatekeeper, and took direction from Business as to where, when, and how it had to exercise its mandate. Very seldom was Procurement executives invited to contribute at the boardroom. Companies that have successfully transformed themselves during the Pandemic, more than often the role of Procurement as critical enabler of transformation strategy, changed materially. 

A comparative Procurement perspective of prevalent trends that are now materializing and, in our view, will persist beyond 2022, are: 

• Procurement organizations are required to interpret their organizations strategy and be able to contract suppliers as critical contributors
• Pre-emptively assess contracting and relationship risks with suppliers, and their third parties
• Contribute to the establishment of their organizations to-be target operating model, by contracting future-ready suppliers
• Be serious about CSI. Customers and investors want to see that organizations care
• Digitize the Procurement function, improve transparency and elevate analytics and oversight
• Acquire for scale, and flexibility. This applies to solutions, supplier-contracting engagements, and commercial models

 So how will Procurement divisions achieve this? Progressive organizations have moved rapidly to implement the following steps: 

• Centralize the Procurement function
• Accelerate the turn-around time a tenders
• Reduce the cost of procurement
• Re-define the importance and contribution of supplier communities
• Contract for B2B, and B2B2C scenarios
• Integrate Procurement, Audit, Legal and Delivery functions
• Leverage of Procurement specialist for skills transfer and tender completion acceleration
• Rapidly build Procurement resilience and be much more responsive with purpose in support of enabling the organizations strategic changes

Conclusion: The Procurement function has changed and changed for the better. New practices and behaviors are required, and Strategic Sourcing to enable an organizations transformation, and growth, requires and entire re-think.