The role of the procurement function is evolving. The “just in time” manufacturing and procurement model — meaning essential goods are made available as the public needs them, not stockpiled in bulk, keeping costs low for both manufacturers and suppliers — revealed its shortcomings at the outset of the pandemic. This was most evident in the public sector, as much-needed supplies of personal protective equipment (PPE) quickly became hard to come by.
Organizations across Canada quickly stepped up to address shortages caused by supply chain disruption, but that hasn’t solved what is now a long-term problem. Organizations are realizing that real-time data and agility are much more valuable than a just-in-time procurement model and that they must learn what worked during the pandemic response and build on it as they move forward and modernize.
The pandemic has underscored the urgent need for the public sector to streamline, strengthen and diversify its supply chain networks by modernizing the core foundations of process, technology and culture. Activating these three levers in a customized and balanced way can help organizations better equip themselves for the future. But where do you start, especially given the ongoing threat of COVID-19 outbreaks?
Business process
Transforming procurement processes will become a key part of every organization’s value stream, in both the public and private sectors. As with all transformation, this must be driven by business benefits. It’s time procurement professionals expand their scope from a strict focus on cost management to enable innovation, agility and supply certainty through effective customer and supplier management.
Processes that involve technology, coupled with smart simplified policies that enable the digital ecosystem and focus on outcomes, will facilitate and accelerate the innovation to which organizations aspire. With an established operating model and technical infrastructure, procurement can facilitate customer and supplier interaction while almost appearing invisible in the daily source-to-pay lifecycle.
Technology
The public sector must be transparent about all critical supply chains, and embracing technology is a good way to achieve optimum visibility. Digitizing the procurement lifecycle, through the implementation of supply chain platforms and leveraging advanced technologies — such as robotic process automation, blockchain and artificial intelligence — enhances decision-making, and enables supply chain professionals to find cost savings and opportunities and remain vigilant to potential challenges and pitfalls.
A digitized and modern approach to procurement doesn’t just let organizations source goods at a reasonable cost, it also enables them to track whether shipments are arriving when they should, whether goods are actually being delivered to those who need them and how the vendor in question is performing over time. Put another way, digitization allows organizations to build greater trust in their supply chain.
Digitizing the procurement journey also generates troves of valuable data sets to help inform future activities — from user demand and ordering patterns to safety stock fluctuations, market data and longitudinal data on suppliers’ performance. This means governments can accurately determine potential risks to suppliers — and, consequently, to their own supply chains — and to predict events that could escalate those threats or lead to supply disruptions.
For example, if certain suppliers depend on foreign raw materials that are susceptible to geopolitical forces, a digitized supply chain can easily flag market risks and alert supply chain professionals to increase stockpiles for a certain period to mitigate supply disruptions. Furthermore, the impact and probability of an event can be translated to a commensurate level of safety stock. This cannot be done using paper-based reports and after-the-fact reporting that is common across many government organizations.
People and culture
Perhaps above all, a successful procurement function relies on having the best, most knowledgeable and diverse talent in the right domains and competencies, shifting from administrative to value add and more strategic roles. To achieve the value and outcomes they’re striving for, organizations must invest in the talent that will drive them forward. The procurement officer of the future wears many hats and has a skillset that covers key competencies that are not always in deep supply in today’s procurement function. Those skills include program management, problem solving, leadership, facilitation and coaching of all stakeholder groups.
As organizations modernize and move towards a value-based approach, a shift in mindset towards a collaborative, customer-centric and outcomes-focused culture is critical, along with a willingness to pursue continuous improvement. This cultural shift can be the hardest component to get right, but without it the procurement function will struggle to become the strategic, trusted and credible business partner it should be. Having strong leadership and change management protocols in place will set the transformation journey up for success. It also enables a culture of continuous coaching and learning both in and outside the organization, where all stakeholders benefit from a better understanding of the value created by a modern procurement system.
Consideration of each of these foundational principles can have real cost saving implications for public sector organizations. Modernization can reveal and help organizations capture volume discounts or rebates. It can also help streamline an organization’s approved vendor list so that fewer vendors are competing for larger orders, but at a better price to the buyer. And it frees up employees who were previously tasked with managing paperwork and manual procurement ledgers to focus on higher-value work such as strategic sourcing and demand management.
However, procurement in the public sector is substantially different from that in the private sector. Cost is not the only consideration. Governments weigh the public good, as well as concepts of fairness and policy goals, when determining how and where to spend taxpayer dollars. For example, a government might have a policy goal to buy more of its goods from women-led businesses or companies that focus on sustainability. It’s difficult to track progress against such goals and to report on it comprehensively with paper-based procurement processes in place.
With digital procurement, as long as the platform is correctly calibrated to monitor for the relevant factors being tracked, the quality of data is in real time and much more comprehensive. This, in turn, can yield actionable insights about the efficacy of government programs and even inform future policy decisions.
Once the key pillars have been considered and the gaps to maturity identified, organizations can start to understand their transformation priorities. The path to successfully implementing a modern procurement platform depends on embracing three distinct phases.
Phase 1: Adoption readiness and benefits definition
The initial phase is all about establishing the right methodology to move the business from current state to future state, taking stock of essential business and program activities involved in the transition — from people matters, policy and process, organization, systems and data.
Readiness isn’t just about how to initiate the transformation process either. It’s about planning end to end from ideation to deployment and assessment. Companies that fail to prepare in advance for all stages of transformation risk losing efficiencies and insights along the way.
Robust adoption readiness involves four considerations:
- Assess: Initiate workshops with business process owners to understand existing operations and establish readiness requirements.
- Mobilize: Use information gathered to define required readiness actions and their owners.
- Inform: Establish a feedback loop with business process owners, leadership, functional and change management teams in advance by developing a readiness dashboard that shows progress throughout the implementation.
- Intervene: Outline a process to monitor and report back to teams when issues emerge following deployment to remove barriers and maintain transition progress.
Together, these four steps can help organizations be more effective in decision-making for each transformation milestone to deliver on the benefits of a modern procurement system.
Phase 2: Business process and solution deployment
This phase is focused on introducing the new operating model to relevant stakeholders and gaining their buy-in. It’s the latter that’s especially important in this step. Organizations too often assume that the job is done when the solution is deployed to the business. But any successful transformation project depends on those impacted embracing a new way of working, from using new processes or solutions for their day-to-day work to teaming across the procurement function to realize more benefits.
For example, a need for a computer monitor sounds simple at first. However, strategically sourcing even this fairly simple piece of equipment means that IT will likely need to advise on what sort of product is best suited for the need in question, finance will have to approve the spend, the legal team will need to review any contract and logistics will have to verify that the goods have arrived before finance makes a payment to the vendor.
Each of these functions in the organization must have access to, be comfortable with and understand how to collaborate in the new procurement system. If they do not, the efficiency gains offered by digitizing can be eroded. That’s why training and attention to change management are critically important in this phase.
Phase 3: Benefits realization and continuous optimization
Once every relevant stakeholder is on the platform and comfortable with how it works, the third phase focuses on using digital procurement to make buying goods and services more efficient and streamlined. The goal is to incrementally bring down the cost of each purchase order, both in terms of money and time spent. This is also the phase in which procurement professionals can focus less on burdensome paperwork and administrative tasks and more on meaningful, strategic work that elevates the organization.
As organizations settle in to and assess their new procurement system and ways of working, they’ll continue to unearth new benefits. The work doesn’t end with the initial deployment; it’s an ongoing journey that will continue to give benefits back over time.
Paving the right path forward
Over the long term, governments must heed lessons from the first wave of COVID-19 and develop detailed policies to support supply chains that are critical for pandemic management, disaster recovery or galvanizing national infrastructure — and be prepared to invest in those strategies. It may even be necessary to legislate supply chain resilience in areas that include PPE, food, health care and infrastructure.
Governments are already taking steps to make supply chains more resilient. The Government of Ontario announced the Supply Chain Management Act in the spring to deploy critical supplies and allow the collection of key data on inventories, orders and supply constraints. The province also developed a virtual inventory tool so that demand for crucial supplies is visible and trackable.
The Government of Canada, meanwhile, announced the creation of the COVID-19 Supply Council, bringing together leaders to provide advice on the procurement of critical goods and services required for COVID-19 response and recovery.
Despite these efforts, COVID-19 has shown that the public sector, like many other sectors, wasn’t fully aware of the vulnerabilities of its supply chains to a global black swan event. The good news is that new and emerging supply chain technologies should help vastly enhance visibility across supply chains and help governments resist similar shocks in the future.
Maintaining cost discipline while ensuring that critically important goods and services are delivered reliably and consistently is a complex undertaking, but vital for our economy. That’s why right now, more than ever before, governments should be prioritizing the digitization and modernization of their procurement and supply chain lifecycles and investing in the right talent, with the goal of building true agility, resilience and value for the long term.
