Procurement’s Opportunity to Create Value
“For the procurement professional, it’s one of the most exciting times I’ve seen,” says Roman Belotserkovskiy, an Austin, Texas-based partner at the global management consulting firm McKinsey & Company. “There are many problems to solve, but the potential value you can create for the company is massive.”
To create more value, companies are revamping their operating models. They’re deploying new technologies, automating processes and moving workers into more strategic roles. They’re creating new roles pertaining to supply chain visibility and increasing the number of analysts supporting the procurement organizations. “They’re trying to get out of the day-to-day firefighting and become more strategic,” he says.
Belotserkovskiy adds, “The importance of procurement and supply chain functions (within companies) has increased. Even in industries that generally haven’t cared much about having world-class procurement, (companies) are shifting in how they’re thinking about the value of procurement, and what well-run procurement and supply chain functions can do for a company and industry.”
In the 12 years Belotserkovskiy has worked in this area, this is the first time he has seen this level of elevation of procurement across multiple industries, he says.
The coronavirus pandemic has helped to facilitate procurement’s increase in value, he says, by driving:
Acceleration of digital transformation. Instead of five years from now, as many companies had planned, they are starting digital transformation processes now, he says. A procurement organization can be rebuilt as high-performing — through deploying technology, increasing labor resources and changing processes — in less than two years, he says: “A lot of organizations we work with today are doing it and trying to get ahead of some of these challenges.”
Increased supply visibility — and visibility in general. “The pandemic brought transparency to weaknesses in supply chains that previously were not visible,” Belotserkovskiy says. “Many organizations had worked with the same suppliers for a long time, and all of a sudden, supply to those suppliers was disrupted, and there were no other options.” Organizations are now looking at second and alternate sources as well as reshoring and nearshoring.
Increased collaboration, cross-functionally and with suppliers. Calling it “the name of the game in a world where being transactional doesn’t work,” Belotserkovskiy says becoming more collaborative will require procurement functions to build new capabilities. He continues, “It’s typically a huge unlock for value creation. It means going from sending in an RFP every year to meeting your suppliers every quarter and talking about innovation, then jointly driving initiatives and sharing the value created.”
Strategic, prepared organizations. “The pandemic also has created awareness of the need for rapid response in dealing with immediate disruptions, like the shortage of microchips,” he says. “How can you build a function that can anticipate this happening next time without waiting for the next crisis?”
Belotserkovskiy cautions, “There is a lot of work to do.” But, he says, “It’s also an opportunity to show what world-class procurement can do for any organization and any industry, and how much more value can be created and how challenges can be addressed in a thoughtful, systematic way.”