Procurement Risk Management: Opportunities And Challenges During COVID-19 Transition
by Des Nnochiri for WBR UK, 29 March 2021
Although vaccine roll out is giving businesses some optimism for a return to more stable conditions by the second or third quarter of the year, the legacy of COVID-19 disruption persists into 2021. The response of procurement has largely been to lend support to critical business operations and bolstering relationships with suppliers, and to focus on spend cost reduction and the capture of non-price value from supplier relationships.
High on the list of priorities for CPOs in 2021 is the reduction of procurement risk so as to preserve supply continuity. This is putting the onus on procurement leaders to beef up their third-party risk management strategies, find early mechanisms for monitoring a broader set of risk exposures, and to continuously monitor and mitigate risk.
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Best Approaches To Vendor Management In 2021
In meeting these challenges, procurement officers need to take a step back and reassess the role of high-risk vendors, and those who are actually critical to business operations. Procurement must coordinate with Business Continuity or Enterprise Risk teams, to identify mission-critical functions -- and how vendors or suppliers support or detract from these functions. It’s also important to identify which categories of risk specific vendors may be exposing the organisation to.
Due diligence and contingency planning are key activities brought to light by procurement units that have been successfully weathering the pandemic storm. For example, in managing its network of 2,500 suppliers from around the world, Samsung has set up a procurement portal for the registration of new suppliers, and conducts annual assessments to help existing suppliers strengthen their competitive edge. New suppliers must meet certain criteria in order to become part of the network, and Samsung works only with Eco-Partner certified suppliers.
The Importance Of Digital Transformation
One of the most beneficial consequences of COVID-19 has been its forced acceleration of digital transformation and innovation efforts around the globe. As part of this trend, procurement has become more willing to adopt new tools and processes. Cloud-based systems and spend solutions have seen a significant uptake, and while the adoption of more advanced technologies such as Artificial Intelligence and cognitive computing has been slower than some might wish, these and other tools are set to play a large part in the continued success of procurement as we navigate a world in pandemic transition.
Major companies have been leading the way in this technology adoption. For instance, ExxonMobil has set up a unified cloud platform called SMART by GEP®, which enables and promotes collaboration between ExxonMobil Procurement and its partner network. SMART provides a centralised venue for various contracting activities, including Supplier Profile Management / Self service, contract terms, pricing negotiations, and status tracking.
Providing Leadership On The Road Ahead
Supply chain assurance and risk mitigation have been board-level issues since the height of the COVID-19 crisis in 2020, and will continue to be so for the foreseeable future. The pandemic has also heightened the profile of procurement in the corporate hierarchy, with so many organisations looking to their CPOs to plot pathways and strategies for spend reduction and crisis management. Moving forward, procurement must seize the continued opportunity to strengthen its role as a strategic business enabler, taking advantage of all available resources and technology.