Sourcing and RFP management in New Normal
The COVID-19 pandemic has put an enormous strain on global supply chains, at times halting manufacturing while shutting down airports and seaports, interrupting delivery of raw materials and finished goods. At the pandemic’s onset, procurement departments switched to crisis-management mode to help companies alleviate disruptions, including sourcing personal protective gear for employees and helping smaller suppliers manage their cash flow.
Another increasingly popular topic is “the new normal.” So far, we’ve learned to adjust to social distancing, mask mandates, and remote work. It’s not implausible to assume we’ll be continuing with these adjustments and then some, for the foreseeable future. So, what does this mean for global supply chains and procurement departments?
While procurement can again play a crucial role in recovering from a crisis, this time procurement leaders should take a different approach to the function in addressing a range of new issues.
In a recent survey conducted by McKinsey & Co., top Asia-Pacific procurement leaders pointed to a significant difference between recovery efforts after the Global Financial Crisis and what’s happening now. Then, most companies focused on strategies to recover from the financial effects of the recession.
Today, in addition to recovering profitability and finding ways to preserve cash, companies face the added challenges of shifting supply-market dynamics, changing ways of working, increasingly volatile demand, and de-risking their supply chain to make it less vulnerable to disruption.
To mitigate supply chain risks in unprecedented times, some organizations have implemented initiatives such as Supply Chain Mapping. Procurement functions can map the Supply Chain from the conversion of goods from raw material to semi-finished conversion to finished goods. Using this map, organizations can indigenously manage suppliers or goods movement and proactively act to transfer risk over a complete supplier base within the ecosystem.
With organizations focused on managing spends, building a strong and highly robust supplier base, RFPs have gained prominence in the operating model. Organizations need newer ways to work with internal stakeholders and external partners with proper communication. RFP is an effective tool to communicate the internal procurement needs to external suppliers via digital procurement technologies. Organizations are now discovering and engaging with suppliers to identify potential delays or operational risks. Organizations have also started identifying alternate sources of supply existing suppliers fail in any evaluation parameters. Organizations have now started floating RFIs as a market research tool for sourcing in categories and added preference for local suppliers.
To sum this up, Digital procurement is an evolving and interesting story. Procurement teams must quickly secure suppliers and are using newer tools to identify sourcing. Organizations use AI-powered sourcing to identify new suppliers and using RFPs to shrink time from scoping to supplier selection with improved cost reduction. Putting in the right requirements and improved collaboration can redefine RFP management and sourcing in the near future. The next disruption era will be defined by the automation of needs and improved collaboration in stakeholders.
