The COVID-19 pandemic brings about a remote work order to comply with social distancing requirements. The changes brought about by the pandemic are here to stay and will manifest into a new normal in the post-pandemic world.
The procurement function has been in the limelight during this crisis. Companies look towards their procurement teams to build resilience into their supply chains and enhance collaboration with employees and other stakeholders.
IT industries were affected significantly during the pandemic. The spending costs of IT industries grew at a compound annual growth rate of around 4.323% in 2020 as the global workforce shifted to remote work order overnight.
The procurement function in IT industries is predominantly indirect and is responsible for procuring supplies necessary for day-to-day operations.
The procurement function’s role in IT industries was further enhanced due to the remote work order bought by the pandemic. Once responsible for ensuring that all offices are well-equipped to perform day-to-day operations, the procurement team is responsible for supporting the organization’s internal customers and enabling them to work from their homes.
It’s been more than a year since IT companies have completely shifted to the remote work model. Since then, the procurement teams of these companies have overcome much of the negative impacts remote work has had on procurement. The short-term effects include the extension of the procurement process and time delays in processing each purchase order and purchase request.
However, long term changes that IT companies embraced to deal with the complexities caused by remote work are here to stay, some of which are:
Category shift. The remote work order has caused a significant category shift for the procurement team from purchasing office supplies to receiving employee requests remotely.
The traditional procurement practices are not equipped to deal with this complex challenge of providing employees with the needed supplies remotely. For example, in the pre-pandemic world, if an employee reports a malfunction in their laptop to the IT department, the IT department forwards a demand order to the procurement department for supplies needed to fix the laptop, the procurement team checks availability in inventory and issues a purchase order to the suppliers’ point of contact.
The computer is fixed in two days or less. After the remote work order, the same issue with the laptop becomes a complex problem.
For example, following the work-from-home order, Microsoft’s procurement team had to reimagine the indirect procurement function that was previously done manually to handle the significant spike in the volume of employee requests from 168,000 people.
To solve this problem, Microsoft uses an automated procurement function to set up home offices for their employees, handling 70% of all employee requests in 20 different countries.
Spend reprioritization. Globally, businesses are suffering from depressed demand, even after the peak of the pandemic, because of their investment priorities. Its implications will include less liquidity for firms that may require the optimum solution via effective cash flow management practices.
Procurement teams must reimagine their procurement functions to enable spend reprioritization by investing in technologies like document capabilities and digital signatures. They’re facing an increase in challenges, specifically in preserving cash inflow, dealing with the changes in supply chain functions, and unpredictable demand forecasting.
Even after the pandemic eases, demand is likely to remain suppressed, and companies may have to face illiquidity. Therefore, reprioritizing investments responsibly in digitizing procurement functions such as invoice handling enables facilitation in situations like a pandemic.
The primary goal for procurement teams of IT companies for the upcoming months will be increasing employee productivity with augmented automation and technology. The procurement team should optimize working capital and liquidity while adopting zero-based budgeting.
Automation. The pandemic’s remote work order has accelerated the adoption of automated procurement solutions that were already under consideration by procurement leaders. Digitalization is an essential enabler of communication and collaboration between different functions of an organization as work-from-home becomes the new normal.
Manually processing hundreds of employee requests for supplies is practically impossible with the remote work order. An automated procurement solution can improve data visibility and enable greater agility in the organization and across the extended supply networks.
High-performing procurement departments are most likely the early adopters of procurement automation. According to Deloitte, the highest-performing CPOs are 18 times more likely to be using cloud procurement solutions and 10 times more likely to have embraced robotic process automation (RPA) solutions.
Procurement teams can use cloud procurement solutions to build an end-to-end solution that would receive the employee request, match it up with available item inventory, and automatically generate and approve a purchase order.
Procurement automation can also be used to develop a support system that would assist employees and suppliers working remotely to improve employee satisfaction, which will play a critical role in increasing productivity during the remote work order. For example, packaging conglomerate SAPIN has sped its purchase orders processing by 75% using an automated tool by Kissflow Procurement Cloud. This was based on reduced lead times for purchase orders. Custom programming enabled the analysis of various ordering scenarios.
Automation clouds help managers conveniently manage vendors and eliminate frauds.
As the remote work order becomes the new normal, cybersecurity risks have increased significantly for IT companies.
Companies must determine the critical functions that must remain on-site. Procurement policy and processes must be reimagined to support the new operational structures of IT companies. Procurement teams should leverage automation tools to make the necessary process changes such that they would facilitate on-site work and enable other employees to work from their homes.
Procurement policies must be restructured to be more human-centric, as committing to more collective well-being can help build resilience into the company’s supply chain, and thereby help the employees working remotely, to overall ensure business continuity.
The automated procurement function previously used to outfit employee home offices can now also be used to mobilize support structures for employees and ensure ecosystem resilience by providing suppliers with access to the same support structure.
Mohammed Kafil is a procurement consultant for Kissflow Procurement Cloud.
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