The Economic Impact of the Pandemic: Survival of the Most Adaptable
An executive leaders’ network virtual roundtable discussion brought together procurement experts across a cross-section of British industry and commerce to discuss a wide variety of challenges under the rubric “Digital Darwinism”. The event was hosted by David Ford, Global Head of Procurement at law firm Freshfields Bruckhaus Deringer. This is the first of three articles summarizing the discussions. Note that the people taking part did so in a personal capacity and any views expressed do not necessarily reflect those of JAGGAER or any other organization or company.
What are the major challenges of the moment?
A panelist working in aerospace highlighted three areas where procurement has had to adapt: “First, in the indirect area, the focus has been on spend management, throttling back what needs to be throttled back and accelerating what needs to be accelerated. Second, direct spend; in this area our activity has actually increased, because airlines and other customers have been laying off employees which means they have capacity constraints and are relying more heavily on us for servicing. Third, all of our business transformation workstreams have been revisited during Covid-19 and tough decisions made on prioritization. There were already lots of plates spinning but we have added a few more!”
The pandemic has had widely varying impact across different vertical sectors and has been especially challenging for high street non-essential retailers. A panelist working in procurement with a high street department store, underlined that it really does come down to adapting in order to survive: “As mentioned right at the start, the pandemic has been all about survival of the most adaptable. We are trying to come out the other side of that with a viable business. Trying to be agile with changing customer needs and changes in government direction in what is an extremely tough environment for us anyway has been very difficult. We had to take some tough decisions to ensure that our business remains viable for the future.”
Online retailers have fared better but there are still challenges. For one of our panelists, the priorities have been cash retention and supply chain resilience. “We profited during lockdown because of the increased volume of online commerce. Our main challenges have been around remote working, in the short term, but the company was also asking whether the business model is fully fit for purpose in the longer term, looking at possible business transformation projects.”
In other sectors the pandemic has disrupted restructuring and business reorientation activities that were already underway, as has been the case for an energy giant represented on the panel. “The challenges for the oil and gas industry are quite obvious, with the price of oil sinking dramatically in line with reduced consumption. But we are also resetting our strategy as an energy company with a view to becoming net carbon-neutral by 2050. Cash retention has been a major focus on cost and driving value, and especially for me in the corporate team, reducing spend.”
Continuity of supply in indirect spend has proven difficult pretty much across the board. As one panelist said, “We’ve become extremely busy because of the pandemic so our challenges have been around supply chain resilience and supporting our agencies and partners to ensure that they can continue to deliver the services in this new world. I’ve also been responsible for PPE sourcing so that’s thrown up a few unusual issues over the past six months, like supplies being stolen at airports.”
For a multinational energy supply company, there are many moving parts. “Keeping the lights on is the paramount challenge of the wider business, which operates a lot of critical infrastructure from power stations to electricity networks. We’re currently building some of the biggest wind farms in the world – so quite a lot to juggle. We’re also knee-deep in PPE and the important thing was to set people up to work from home. One of the things we needed to fix was around contracts. We were entirely paper based, so we implemented an e-signature solution in a couple of weeks, something that has been on the ‘to-do’ list for a number of years. It’s amazing what you can do quickly if you need to, so that’s accelerated our digital agenda.”
Another procurement professional in retail commented: “Since the pandemic broke out, we have put a huge amount of pressure on our suppliers to make the 500 supermarkets we have safe for our employees and customers,” he said. “That means a lot of work securing PPE and screens, but we have also been applying a lot of pressure to diversify our offering into new areas as a result of pubs and restaurants being closed. Because we are designated as key workers, we are also working onsite, which poses a challenge to implement staff rostering and keeping employees safe. And apart from the stores, socially distancing in a large corporate office building is not easy.”
A senior project procurement manager with a company that builds rolling stock for railway companies, responsible for after-contract management in categories such as bogeys, generating units and braking systems, said: “In terms of dealing with Covid-19, we are fortunate to be working in a priority area – the government needs to keep the trains running. In contract management we have automated processes, and we are now dealing less with paper, something we’ve been talking about for several years. Working in direct materials, getting inspections completed is a behavior that can be technically supported, though we found it quite clunky during the first two months of lockdown. Technology aside, I’d say that the softer procurement skills have become more important than ever as a result of the pandemic given the lack of face-to-face contact.”
The head of group procurement at an energy services and solutions provider with a number of companies under its umbrella commented that the firm’s response to Covid-19 can be split into the reactive and the proactive: “The reactive element was in Q1 and Q2, prioritizing risk mitigation in the supply chain and working capital and cashflow protection, and the proactive element has included an acceleration of the transformation journey we were already on, a large part of which has been the digitalization of processes so that we have clearer ROI on our activities in this remote setting, to ensure that we are concentrating on the ones that drive value.”
Finally, a category manager in the higher education sector said, “The major challenge for us has been switching to the new normal of digital working. Previously most of our work with suppliers, and with customers and stakeholders, was in face-to-face meetings. It was also important to avoid becoming a blunt tool for cost reduction and losing our focus on adding value and on sustainability and corporate social responsibility issues.”
In our next report on this fascinating roundtable discussion, we’ll be examining the topic of autonomous procurement.
If you would like to participate in upcoming virtual roundtables, get in touch. It’s a great way to find out what your peers are doing in multiple sectors.