Cost Savings

Aside from the Coronavirus, What are Procurement Organizations’ Top Priorities in 2021?

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Cost reduction is still the number one priority for about a third of organizations. Ten years ago, that would have been closer to two-thirds. The change reflects the fact that many organizations are already driving costs down successfully. Of course, we have seen some fluctuation as a result of the pandemic. According to Duncan Jones of Forrester Inc., between January and May of 2020 the percentage saying that cost reduction was a high or crucial priority for the year shifted from around 33% to 37% – a change, but not a huge change.

Duncan added that at the same time, there was not much of a change in other corporate priorities such as improving products and customer experience and innovation. They are still looking for cost savings, these are focused on the ones that really minimize the impact on these other priorities. Specifically within the procurement community, our snap surveys showed that improved supply chain reliability and resilience is the top priority for another third, followed by greater agility to react faster to changes in customer demand.

Of course, the sector you are in, and the way it was impacted during the pandemic, will have colored your views on this. If you are in an industry such as transportation and hospitality, and you saw revenues plummeting, you’ll have had to focus on reducing costs. You had no choice. But if your revenue remained stable or even grew because you were busier than usual, in sectors such as logistics and contactless technology, the agility to respond to changing market conditions will probably have been your number one concern.

In higher education, everything changed after spring break. Suddenly procurement organizations had to make out-of-the-ordinary requests for PPE and equipment for faculty to work and give lectures from home.

Think outside of the box

We spoke to Lori Brierre, Director of Strategic Operations at Clemson University, and Mark Mills, Executive Director and Chief Procurement Officer at the University of Pennsylvania about how they coped and their plans for the future. Mark told us that supply chain reliability and resilience was huge. “We talked about it with JAGGAER, having rolled out JAGGAER Invoicing and Supplier Management in 2018, and we were just happy to have removed paper from our process, from the check request onward. It was an inconvenience. But when Covid-19 hit, all of a sudden everybody needed to be remote, and not having to bundle pieces of paper in rubber bands and sending them over to the finance building meant we could carry on with our work in safety.

“The other piece was being able to use our systems to allow preferred suppliers to do their shipping in an approved way to home offices. People could teach remotely, work remotely and all that. Covid-19 really highlighted the value of electronic procurement systems.”

Directed spend

However, Mark highlighted a further important gain. “We do a lot in terms of directing spend. And as any procurement person will recognize, when everything went crazy, I must have gotten 30 cold calls a day from somebody selling PPE: ‘I got hand sanitizer. You want some?’”

(Lori had a little chuckle at this!)

“But we identified some of our best local minority-owned small businesses to which we were able to direct spend, and they’ve been champs and plowed through Covid-19 even at the hardest, most challenging points. They really came through for the University of Pennsylvania. And again, it comes back to systems and being able to do that within a procurement system, to be able to communicate in order to direct spend like that.”

Organizations that are normally extremely risk-averse – including governments – and had tight processes (whether manual or electronic) in place found that, when confronted with a crisis of the pandemic’s proportions, they just threw processes overboard and got the supplies they needed where they could. And often got their fingers burnt as a result. This highlighted the emphasis that is now being put on supply chain resilience and agility. “I think this comes back to the importance of strong supplier relationships. So when you’ve had an ongoing relationship and you need to have everybody step up together and work through something, it becomes a lot easier than if you suddenly need to grab a supplier’s attention among everybody else who’s trying to grab their attention,” Mark said.Supplier relationships

“It was definitely show time for those of us in procurement in 2020,” Lori added. “Relationships were everything for us during Covid-19. Because we had invested in how we on-board our suppliers and everything is now automated it’s boom, boom, boom, they go through the system, and only if there’s an exception do we need to of manage those things. For us it wasn’t so much getting things like the PPE that presented a challenge, because we were in lockstep with everyone else in higher ed in trying to kind of get those things. We drew on existing relationships with existing strategic partners to get the stuff here, and get it delivered out throughout the state.”

Sanctions compliance in three clicks

“Where the challenge came for us is that we also receive research funds. Federal dollars,” Lori continued. “The challenge then begins when you have to keep up with sanctions. So we had a lot of sanctions going on at the same time as Covid-19. There were suppliers that may or may not be in your database and for whatever reason the United States of America says, ‘We’re not going to do business with these people anymore.’ Having automated our system made things easier: click, click, those folks are gone, click, click, those people are back on!

“So having the right technology, and with everyone adopting it and understanding its importance, allowed us to be agile. We didn’t have to spend our time trying to figure out what equipment I’ve been buying from a supplier that’s now banned.

“We have the JAGGAER supplier management module implemented, which runs checks on OFAC [Office of Foreign Assets Control] sanctions lists. We then brought on board visual compliance, from Descartes, who got together with JAGGAER and we did a project together, so it’s all automated. And we also are on board with the IRS to validate our tax ID numbers and things like that. For a lot of people sanctions compliance is a manual process but not here at Clemson University, we have it completely automated. It was a great project with JAGGAER and that made it much easier for us to keep up.”

Lori and Mark’s experiences highlight the increased focus on resilience and agility in procurement, and the way in which technology is an enabler of both. There is no doubt that many organizations that were perhaps skeptical about investing in the technology before Covid-19 now see how their peers and competitors, who made it a priority, are well paced to thrive in the new environment.

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