Subscribe to the blog

Get the latest Procurement insights from our experts

Procurement’s role in building business resilience

by | August 10, 2022

The recent business landscape is showing us companies that operate in a more and more volatile environment, filled with many uncertainties and various disruptions (economic and political). All these disruptions are having a major impact on procurement departments. In doing so, to maintain competitiveness, companies are now in a position where they need to prepare for almost any kind of disruptions. One way of facing these uncertainties is described by the concept of resilience, which gained increasing attention in research in the past years.

What is procurement resilience?

CFOs around the world are at a critical stage. Despite the need to resolve continuous disruptions, the past years came up with opportunities for growth. All these require speed in acting in a strategic way, clear thinking but also innovative and tactical ways of dealing with the unknown. In this context, CPOs are acting as key partners for the finance function and important collaborators in delivering improved investment priorities and new business plans.

Resilience helps companies in designing their ways of operating in such a way that they are affected as little as possible in the event of a disruption. It also plays a strategic role in quickly helping companies return to their original state.

The degree of resilience is highly influenced by the actions implemented before the disruption happened. Lack of preparation for ways to reduce the damage created by these unknown disruptions can lead to ad-hoc, inefficient responses to these events. It is important to design a systematic resilience plan, to be used when the need arises.

Besides many other definitions, resilience means accepting the new reality. The term resilience is complementary to agility, and in procurement, we can define it as a strategy to strengthen the ability to manage risk and disruptive events.

How can resilience help procurement processes?

Based on these common facts the business world is facing today, procurement specialists might ask themselves how can procurement help build this novelty element of competitive advantage, called resilience.

There are three fundamental areas to a successful resilient business we were able to identify as key factors derived from procurement processes: building a robust data-driven procurement system, digital transformation through next-generation capabilities, internal resilience, created based on the upward trend of procurement’s role.

Resilient data-driven procurement systems

To achieve the requested resilience and maintain it, procurement functions need to first understand the importance of speed and transparency. This can be achieved by leveraging data-driven procurement systems that complement and standardise investments through the adoption of data driven procurement technologies. These help businesses become more effective in capturing relevant data and using innovative approaches to better understand how to use the captured data in solving disruptions.

There is one Harvard Business Review article, which deepens this topic of creating resilient value-driven systems. They are showing how a shift away from transactional procurement, towards developing value-creating systems based on relevant data, can help businesses gain more resilience in the decision-making process. These resilient value-creating systems focus on a key offering, which procurement helps bring by developing whole procedures of value, rather than just chains of value.

The procurement strategy and resilience in procurement are highly influenced by different factors. Therefore, a data-based approach that reflects different risks aspects is needed to design procurement strategies.

Next-generation capabilities

Technology can be of major help in achieving the needed visibility into procurement processes required to drive resiliency. Even so, next-generation capabilities can be challenging, and it is important to have a an overall business strategy which nurtures such actions. The pandemic was a driving force towards this area, with more people willing to adapt new ways of working, especially digital ones. Digital transformation can ensure larger availability and easier adoption of Source-to-Pay tools, through programmatic development of core procurement processes. Adopting a world-class digital procurement solution to drive profit enhancements, mitigate and reduce risks and provide visibility and control has imminently become the goal of every business that is working on building business resilience.

Resilient workforce and workplace

Cost and strategy aside, businesses must continue to function well in the face of possible changes. For most, this means making some changes in the workforce and workplace. Procurement can make specific contributions on the wellbeing and resilience of employees.

Another challenge for a procurement function is the successful recruitment of talent as a crucial part in building up a resilient workforce and workplace. There are some key steps that organisations are already taking in this area. One example is the increasing focus on the future workforce, which often has a more variable skills base and flexible mind-set that can grow within the company. There is also a focus on a healthy internal workforce, proven by enhancements in the employee well-being and benefits packages. The future workplace will also need to be resilient as part of a broader strategy. The goal will be to create a safe working environment both in the office or at home, and the procurement function must play a strategic role in increasing workplace resilience.

Collectively, all these actions can help companies develop a resilient procurement function that can respond in an effective way to disruptions in the business environment. In volatile environments, businesses need to prepare for disruptions and increase their resilience. And especially in the context of procurement, the design of the procurement strategy has a major impact on a company’s resilience.