COVID-19 Procurement Response: Your Questions Answered
JAGGAER’s Amenallah Reghimi and Michael Roesch recently partnered with Philip Ideson, founder and managing director at Art of Procurement, to bring procurement professionals a presentation on response tactics for the current global crisis. Our speakers received far more questions than they were able to answer at the time, so we’ve compiled some of the best and asked our presenters to provide a little bit of extra insight.
1. As we talked about challenges we face around working from home and the need to enhance/implement new systems, do you have any thoughts on change management in the organization: system implementation challenges, business users’ adaption to new systems etc?
Philip: That’s a great question. There are two considerations that, while they are important under normal circumstances, become amplified when everyone is working remotely. The first is the critical need for strong project management with a focus on change management and communications, and an empowered project lead. Secondly, intuitive UI/UX becomes even more important as your users will have less ability to ask a colleague how to perform a function – they’ll be figuring it out on their own – and your adoption will be dependent upon their ability to do that.
2. How can we as purchasers manage constantly updating market prices in order to stay competitive and attract customers during this unstable situation?
Amen: One thing is just making sure that your supplier data is fully up to date and you have open opportunities. That means being able to get live pricing updates from your suppliers and from the broader market so that you can do live benchmarking. You can also run sourcing events more frequently to make sure that you’re getting the most up-to-date prices.
Philip: To add to that, I think a quick win opportunity is using something like an eAuction to quickly understand the prices in the market. Because they’re commoditized items there are relatively small changes in cost.
3. What JAGGAER module is Predictive Analytics part of?
Amen: The Predictive Analytics tool is part of the JAGGAER Analytics solution. Here at JAGGAER we did a pilot project to test our ability to do predictions using an external system to get the index’s predictions.
Based on this, we came to the conclusion that even if we can have many pre-designed dashboards for Spend and Sourcing in general, for Predictive Analytics, this can’t be an ‘out of the box’ capability. Instead, our goal is to build the framework and discuss use cases with the customers and then add the possible ‘what-if’ scenarios.
That said, if a customer/prospect is interested in collaborating with us, we will go through a defined check-list to better understand what they’re trying to predict. For example:
- What analysis do you currently do related to spend or price forecasting?
- Which commodity indexes do you currently track?
- Specifically, what data or information would you like to provide?
- Who in the organization would use this data or information?
- Which categories would be in scope?
4. How can we go about reducing the risks related to lead time in a situation like this?
Michael: Lead times are a massive concern right now. One of the biggest things you can do is make sure that you have a diverse group of suppliers and backup suppliers for your essential items. Depending on a single supplier means that when their production or shipments are delayed, you have no easy option to mitigate the extended timeframe. If you have backup suppliers who you can turn to quickly, you’re less susceptible to delays. That’s why the “what if” scenario tool is beneficial; it can help determine whether a single supplier, two-supplier, or multi-supplier configuration is the best balance of risk vs. cost.
5. We’re all going through an unprecedented situation filled with lots of known and unknown challenges, but the other side of the coin is perhaps “opportunities.” What do you see as being potential opportunities when this is all over?
Michael: I think with everyone working from home and being digitally connected, we’re starting to recognize how vital digital connections are, between employees or between buyer and supplier. I think this will also help procurement teams learn to be agile. If you weren’t agile before, you’re recognizing the impacts of that. So I think those are two of the biggest things that procurement teams can work on now and moving forward as we recover from this.
Philip: Something that I would add is that so much right now depends on how your specific organization has been impacted. Some are in growth mode and are actually accelerating that growth. Others are playing wait and see, while still others are heavily impacted and just trying to adapt. Some companies have the opportunity now to help their supply base and help get cash into their hands, which strengthens that relationship. If you can be there for your suppliers, that’s really powerful.
6. Do you have predictive tools for looking into the future, rather than only looking back?
Amen: Absolutely. In our analytics tool, we give the ability to do “what-if” analysis, which gives you predicted impacts on what would happen if you were to change a certain parameter, whether that’s a cost, volume, supplier, or something else. And this can be accessed across sourcing, spend, savings, and more. We’ve been able to start building machine learning algorithms that can actually help you predict those what-if scenarios, rather than you building them yourself. Those predictions are based on categories with data from your own system and external sources. So you can apply additional what-if analysis to give you a better picture.
7. Why do we see a decrease in procurement activity during COVID? I would expect it to increase as companies stock up on materials they may not have access to in the future.
Michael: There are definitely some areas where procurement has increased. Look at grocery stores, who are ordering more pasta, rice, and toilet paper than ever before, or the medical field where PPE and other equipment are in extremely high demand. However, for many industries, decreases in business and economic instability have led CFOs to advise against unnecessary purchases, instead erring on the side of cash preservation. Finance departments are decreasing spending, which means less procurement. For some, demand might increase but suppliers are unable to meet the demand, or their supply lines are disrupted because they depend on manufacturing in China, Japan, Germany, Italy, or other nations hit hard by the virus.
8. You mentioned that prices may jump once lockdowns come to an end in some areas. Can you say more on why this may happen?
Philip: I believe that this will be down to pure supply and demand. Many organizations are taking capacity out of their supply chain – whether that is airline seats, manufacturing line shutdowns, or reduction in employees at a professional services firm. It will be in their interest, at least in the short or medium term, to constrain supply so that they have pricing power, leading to higher prices. I do not anticipate this playing out across all products and services that a business buys, but on the other hand, we cannot assume that all prices will decrease just because total demand is lower.
9. Do KPIs in JAGGAER assess data from external sources like ERPs? How often is external data refreshed?
Amen: Yes, JAGGAER can bring in data from ERPs and other third-party data sources. What JAGGAER then does is take that data and draw KPIs from them. We can easily build new KPIs from internal and external sources.
We have the ability to configure the frequency based on the customer use cases and it depends on the amount of data to be transferred. For spend, we typically do it on a monthly or quarterly basis but in a crisis situation we advise to do it more often. For other data, like supplier risk or supplier information etc. we can do this on demand or more frequently like multiple times a day, weekly etc.