Procurement and supply chain teams have proved vital for business continuity in 2020. Around a virtual roundtable, seven experts advise on how these teams can trigger growth in 2021.
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Simon Leigh: Group procurement and supply chain director at Whitbread
Sami Naffakh: Chief supply officer at RB Reckitt Benckiser
Malcom Harrison: Group chief executive of the Chartered Institute of Procurement & Supply (CIPS)
Thomas Udesen: Executive vice president and chief procurement officer at Bayer, and co-founder of the Sustainable Procurement Pledge
Benjamin Guilbert: Vice president of procurement for Europe, Commonwealth of Independent States and Turkey at Mars Wrigley
Laura Hobbs: UK and Ireland procurement programme lead for construction company BAM
Q) What is the priority in 2021? Is it to get back to implementing plans disrupted by the coronavirus pandemic?
SL: I think the dynamics have changed and some plans need to be revisited, especially in a business like ours [hotels and hospitality] which is very volume dependent. We have to plan for 2021, 2022 and beyond, but we have to do it with a lens that we’re not back to normal, and we’re still going to have to flex and adapt.
MH: I talk to people across a whole range of different sectors and what we’re seeing is very different changes in demand. Some people have seen a huge fall-off, others have seen huge increases. Some, particularly in food, have seen shifts in distribution channels which has had a big impact on packaging formats. So everybody has to plan differently, adopting the same principles but in a different context.
SN: I think it’s important to say we’re not out of the woods yet; we have this second wave which is hitting us in a number of markets. The key question is how many of those changes will stick and how much is going to revert to what we knew? Until that’s clear, it will be difficult to plan.
BG: I agree. One of the key things we need to do is understand more complex data. Tools that profile and monitor supply networks to reveal risk in real time can help significantly. Some technologies are now offering predictive analytics, artificial intelligence and machine-learning to get everything in one place so that if something is changing, you can act on it quickly. Yes, we’re still in firefighting mode, but we need to move from being reactive to proactive. And then to be predictive. Digital is a critical enabler.
TU: It’s important to be clear that the world of procurement didn’t start with COVID-19. Many of our teams have worked for many years getting ready for disruptive events and the ones who were really prepared with long-term plans were the ones who weathered the storm well. Of course, we have to react and we have to recover. But the plans we’re executing were not created now, they were created years back.
“It’s not just returning to the plans that were there before 2020, it’s about accelerating them in areas such as digital transformation”.
LH: We’re lucky enough that the government’s investment in infrastructure across the UK has given us a degree of certainty. Our challenge is further down the value chain; as an industry we subcontract a lot and that makes the industry fragmented. Our focus was managing tier-1 subcontractors and we haven’t had true supply chain visibility, until COVID hit and we realised this lack of visibility caused chaos. Our investment in the next few years is improving our demand and forecast planning to allow us to grow and meet our government customer
RB: We work with many different sectors and it seems that as the understanding of what procurement can deliver rises, so do expectations. But it’s not just a matter of returning to the plans that were there before 2020, in many cases it’s about accelerating them in areas such as digital transformation. We’re seeing that across the board. Agility is more natural for some companies than others. Some companies are more flexible and innovative than others and there are clear differences between sectors. Also it’s important to identify agile suppliers.
Q) But how do you identify such agile suppliers?
RB: The ones that were flexible and responsive during lockdown will be the ones able to adapt more effectively to new working practices. It’s a question of looking at historical performance and having effective relationships. We’ve seen fantastic case studies of companies improving their relationships with suppliers over the last six months, finding more flexible ways of working together and also being realistic about the challenges they now face.
Q) How can you prepare for growth amid uncertainty?
BG: We’re doing a lot more scenario planning. For instance, we sell gum and gum is an impulse purchase; with people travelling less, it impacts demand. We don’t know whether demand is going to be an “L” shape, a “V” shape or a “U” shape. The only thing we can do is plan for different scenarios.
MH: Some organisations for years have built their supply chains around resilience, probably because they had to deal with large seasonal swings in demand. Look at ice cream, for instance; to get a tenfold swing in demand when the sun comes out is not unusual. You can’t predict that, but you have to be ready to handle it. Perhaps some of the industries finding this agility most challenging have been the more stable industries that have to build it into a supply chain which was never originally designed to be so agile, rather it was designed solely for cost efficiency.
Q) Is this agility a technical challenge or a cultural one?
LH: It’s a bit of both. When I joined the construction industry, I read a McKinsey report showing our industry’s productivity was pretty flat while manufacturing’s had doubled. So this is a massive opportunity to go into a “reset, restart, reinvent” cycle where we fundamentally change the way we build. Our forecast isn’t just for the ways we built things yesterday; it’s how we’re going to build a procurement strategy that helps us reinvent this industry, taking labour away from the site and doing more in a manufacturing and assembly environment. We’re
looking forward and trying to change our procurement strategy completely.
Q) What lessons learnt during the first phase of the pandemic can be applied to recovery and
TU: We saw that when we collaborate as an industry, or even across industries, we could make it work. We were also working with governments, making sure everybody got the relevant PPE [personal protective equipment]. If there’s something we can take with us into the world post-COVID, it should be that sense of collaboration, where we work together on issues such as resilience and sustainability.
LH: We’ve seen that in the Brexit preparations we’re doing now. We’re working more closely with the government, other contractors and construction bodies to tackle this together. Before, we would have all done our own Brexit continuity plans, so this is a real change for us.
SN: I think the whole theme of corporate purpose has taken on a completely different dimension. In countries like India and the Philippines, the connections between NGOs, government bodies and the private sector have strengthened throughout this crisis because they had to work together. Post-COVID is going to be different from pre-COVID.
Q) But in a recession there is also a focus on price, the traditional focus of procurement teams. How do you balance that with improved sustainability?
MH: There always seems to be the assumption that sustainability costs you money; I disagree with that. Over the years, I’ve seen many examples of sustainability that make good business sense as well. Focusing on reducing energy consumption, efficient logistics… they’re good from a sustainability point of view, and this approach also appeals to consumers and ethical businesses.
RB: It’s a tough trading environment. But a race to the bottom, using the lowest-cost suppliers, ultimately presents risks of reliability and non-compliance. No company wants to compound the losses of 2020 with additional problems like these.
BG: I think where procurement is becoming absolutely essential is our ability to understand what is a good and a bad cost, eliminating costs that bring zero value to the consumer so you can improve something that does.
SL: One of the words I use quite frequently is curiosity; as a procurement function you need to continue to be curious. Building relationships is beyond essential. But also you need to boil down what we’re here to do and how we can demonstrate value beyond traditional sourcing. Ten or fifteen years ago there was a buying mentality, but it has evolved massively. Sustainability is a huge area of focus for us with our Force For Good programme, and procurement can play a huge role in supporting and adding value to this.
“If there’s something we can take with us
into the world post COVID, it should be that sense of collaboration, where we work together on issues such as resilience and sustainability”.
Q) How do you import innovation from your supply chain?
You need to know the answer to the Spice Girls question: what do you really, really want? Then
you need to clearly describe it to your suppliers and have a collaborative dialogue. And you need to find a way that makes it attractive for them to come up with solutions. If you do these, then you will find that many people are super keen to work with you because many of your competitors just don’t operate like that.
Q) Are people turning to technology to help procurement with these problems?
SN: People are accelerating their move to tools such as dynamic commodity management, demand sensing and predictive analysis, plus the scenario planning that Ben referred to. The acceleration is massive because people realise that when you’re in such a volatile environment, you can’t play with the usual tools such as Excel spreadsheets. What was taking years is now taking weeks.
BG: We need to be super precise on priorities because we risk thinking digital is the answer to everything. It’s not and you must be crystal clear on where digital will add value. It is an enabler, but it has to be in the service of something else.
RB: We’ve seen some fantastic examples of people using our technology more effectively during the pandemic and some have been very simple. For instance, we’ve seen big companies use technology to educate their suppliers on new ways of working, treating their suppliers in the way historically they would have treated their employees, realising they need to take care of them. There’s also the vast and growing amount of supplier data. It’s only through technology that we can collate this and present it to procurement users so they can make sense of it and ultimately make better decisions, and create more sustainable relationships.
“It’s up to us to come with ideas to drive the business forward. We need to be confident, be bold and be curious”.
Q) How can procurement and supply maximise their contribution to growth and recovery?
SL: It’s up to us to point out that we can help improve across the company’s entire value chain. We’re in contact with the costs, we can help manage risk, we can help with sustainable sourcing, we can drive the commercial top line as well. It’s up to us to come with ideas to drive the business forward. We need to be confident, be bold and be curious.
SN: Our company has three main priorities post-COVID. First is to protect the business and brands; this is all about things like resilience and capacity. The second is to drive growth through value, issues like innovation and social impact. The third is to fuel growth via productivity, not cost-savings, but productivity. On all these three topics, procurement and supply have a key role to play. So it is essential.
Excerpt from Raconteur Business Growth & Recovery special report published in The TIMES.