Whenever there’s an occasion to get an insider’s view of the current purchasing mindset I jump at the chance. ProcureCon Canada provided just such an opportunity earlier this month with their webcast Disruption, Digitization and Managing/Engaging with Suppliers.
These are the procurement themes that came through: procurement strategy | contracts | working capital | workforce. These are summarized below but in broad strokes, here’s what it means for RFPs and similar bid types. Of course each vendor would have to adapt for the specifics of their business.
- Analyse your own procurement practices and develop your own procurement strategy. Having such a document will reassure proposal reviewers you have thought about and reinforced the weak links in your operation.
- Master Service Agreements (MSA’s, or Master Purchase Agreements) will predominate so become well acquainted with MSA agreements beforehand. There is not enough time during proposal preparation to become acquainted with the nuances and implications of the language.
- More MSAs also means one chance to win on less frequent postings. With repeated extensions built in, whoever gets the coveted trusted status can hang on to the contract for a long time. If that’s you congratulations. Although it’s yours to lose when it comes time for renewal. So pursue frequent dialogue with your client to find out how you can add more value and talk about new ideas. If it’s not you, then more important than ever ask for a debrief to find out what you need to bolster in your next proposal.
- Know and show your industry’s best practices. Explore the possibility of 3rd-party accreditation like ISO and weigh the pros and cons of proceeding. At the very least prove you know what the standards are and abide by them even if you can’t afford the certification.
- Assess how well prepared you are to respond to an Amazon-like buying model. It may not be in the next Request for Proposal but the day will come. Start thinking about it now.
- More demand for aggressive prices means finding even more ways to reduce your costs, e.g., efficiencies, automation, robotics. Partnerships, affiliations or joint ventures are another way to fortify your position.
- Adding value and addressing emerging concerns as well as meeting the criteria will carry the day.
- Ensure your Health & Safety policy clearly spells out your Duty of Care for both your employees and contract workers.
- And don’t overlook other important interests. Diversity/inclusivity and green/sustainability are becoming equally important to companies.
COVID laid bare just how many moving parts there are in the procurement process, and how interconnected. This was the catalyst for more analysis and collaboration across the business organization. This in turn is triggering a wholesale change in procurement culture.
Procurement has been a relatively autonomous function for the most part. Beyond the specifications and contractual language, other input was typically incidental. Companies are now developing procurement strategies with cross-company involvement.
With COVID every block in the supply and delivery chain came under scrutiny. What this revealed is relevant data is quite fragmented. And this made exploring root cause, best practices and lessons learned awkward and time-consuming. Having now seen the value in having collated data, companies are moving to remedy this gap.
COVID also exposed the vulnerabilities in relying on outside sourcing. While outsourcing will continue, what will change is the demand for more risk-free production and speedier delivery. Companies will be looking for increased automation and digitization. Going a step further, companies will also look at supplier’s processes for weak links. They will also look to shift to on- or near-shore producers to reduce shipping time.
The health crisis also highlighted how inter-linked companies are with their suppliers. Trust in vendors will become paramount. MSAs provide the most security – a longer relationship – but with more “outs” weaved in to better pivot as the need arises.
There will also be a move away from single source acquisitions, shifting to an Amazon-like model of procurement. This means securing a diverse supply, selective uptake, and performance-based retention. Instances of this already exist. For example, a Crown Corporation recently issued an all-inclusive IT workforce Request for Proposals. The RFP spanned all the IT functions across the organization. With overlapping MSAs the agency has more assurance of availability. Performance criteria were also very strict. Two for example: a pre-qualified IT specialist must be ready to start work within three days and, with liberal non-performance language, easy to dismiss contracted workforce.
COVID renewed focus on mitigating cash flow risk and negotiating better terms, whether its reducing costs and/or adding value. This will translate into demand for more aggressive pricing.
The health crisis showed how important a reliable workforce is. And with that, a flexible work arrangement with functional e-mobility apparatus in place and having to pay more attention to work/life balance.
Companies are also having to update Health & Safety policies to prove Duty of Care for all work situations. COVID also showed how communication is an art form, in word, tone, body language, channels, and dialogue.