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Just when it was beginning to look like the U.S. might weather the COVID-19 storm and come out the other end, several states began reporting higher numbers of new cases, hospitalizations, and deaths as a result of the pandemic. As the number of states experiencing higher outbreaks grew, some began instituting rollbacks of their reopening plans.
This once again put businesses in the position of having to fight this invisible enemy while keeping their employees safe and meeting their customers’ needs. Already weary from their first round with COVID, companies are now seeking new strategies to help them ride out this second (and possibly even subsequent) waves of the pandemic.
To help procurement departments navigate these complexities, SourceToday compiled a list of top recommendations from a couple of organizations that are in the trenches on the topic. Here’s what they had to offer:
- Start with your supply chain. Zoho says that a well-structured procurement team can mitigate the worst effects of a recession by helping firms manage their supply chains and associated financial, operational and contractual risks. “By diving deep into the different categories of spend and devising strategies for each, your team could reduce [its] spend on a whole new scale,” Zoho writes.
- Build and maintain a strong procurement team. Procurement teams are in a good position to be able to step in and enact spend reductions that help organizations weather the storm. For this to happen, Zoho says companies need a strong procurement team that covers purchasing, strategic sourcing, contract management and data analytics and reporting. “As you are honing your procurement team, make it a practice to conduct reviews constantly and perform regular rollbacks when needed,” it adds. “This boosts employee morale, helps avoid massive layoffs, and is better for your firm in the long run.”
- Invest in contingency planning. Having a plan in place is the first step in risk management in a time of crisis. “It’s crucial to factor contingencies into your sourcing and procurement strategies,” Zoho advises, “keeping in mind that the market conditions are not always going to be favorable.” Some of the activities that procurement can manage and/or get involved with include generating updated business plans, developing viable roadmaps and creating liquidity scenarios. “[Factor in] the revenue and operational costs of your firm and the different outcomes of current and future market disruptions,” Zoho adds.
- Revise your contracts. What terms can you renegotiate right now? If there are areas of your agreement that you already know will not be met or won’t be necessary for 2020, now is the time to evaluate them and make appropriate revisions with your suppliers. “You may also find opportunities for savings or improved relationships with your suppliers due to market shifts,” procurement software developer Jaggaer advises. “For example, the market price of goods may have dropped and you’ll want to take advantage. Or perhaps you can use incumbent suppliers for different goods in order to maintain your relationship through the crisis.”
- Prep yourself for some rapid decision-making. Procurement teams need to be able to make decisions rapidly and relay them to suppliers immediately, Jaggaer points out, noting that manufacturing companies decreased production during the most recent recession. Then an interesting thing happened: Production capacity decreased, but the breadth of items being made remained steady, so the same parts were needed from the same suppliers. “We’ve seen similar patterns with COVID-19,” Jaggaer writes. “As workers are furloughed and manufacturing plants temporarily close, production slows. As a result, volumes of orders are fluctuating significantly. It’s vital to be able to communicate these changes proactively to suppliers.”
It’s equally important for suppliers to be able to quickly communicate changes to you, Jaggaer adds. In some cases, this might be an inability to deliver on time. “You’ll want to know as soon as possible if that’s going to happen,” the company states. “Conversely, as suppliers ramp back up, they’ll be able to communicate quickly that parts or items are available again.”
