During recent times, supply chains and supplier relationships have been tested like never before, putting the Chief Procurement Officer centre-stage and in the spotlight to find solutions as businesses try to protect operations, revenue and profitability. Throughout the Covid-19 crisis we’ve seen many procurement teams adopt a so-called “dash for cash” response (i.e. a classic cost-out initiative) - whilst not a surprising response to a crisis it’s a very short term in focus and easy to do. There are many levers available for such an approach (control demand, change the specification, limit usage, aggregate spend and so on). Yes, cost-out has the potential to yield results quickly and it will help the bottom line but it can do a lot of damage at the same time - the kind of damage that is difficult to undo.
We’re not saying that cost-out is intrinsically a bad thing, but how it is done is crucially important. It’s often used without fully appreciating the wider consequences - it hurts supplier margin and it kills the goodwill in supplier relationships. And as we slowly work towards post-Covid recovery, an organisation that just a few months ago acted with scant regard for its suppliers will probably not be a ‘customer of choice’ to those same suppliers going forward.
There can be little doubt that the Covid-19 pandemic has been the most significant, and perhaps the most traumatic experience many of us will have had in our lives. It has and will continue to have a huge impact on us as individuals, as a society and as a workforce.
The last few weeks has seen countries, businesses and most importantly people facing unprecedented challenges. For us, what is becoming evident is the ability of people and businesses to respond to these challenges and adapt rapidly to what for some time might well be the new normal.