Right now, the focus is very much on business resilience. And for good reason. COVID-19 has disrupted long and complex supply chains and Just-In-Time systems like never before. So, what can Procurement do to help build this “new” element of competitive advantage called “business resilience”?
In my view, there are two key areas where the function can help. Firstly, the area of employee wellbeing, including employee resilience and facilitating remote working. And secondly, when it comes to re-thinking the way the business works with suppliers and other key stakeholders, Procurement has a central role to play.
Resilient employees
But, what can Procurement actually do to help improve the wellbeing and resilience of fellow employees? Quite a lot, as a matter of fact. Some very specific contributions include sourcing the right equipment and (cloud) software needed to ensure productive remote working. Since there are so many platforms and solutions in the market place, it is particularly important to ensure the selected solutions are fit for purpose and scalable.
Other aspects of employee wellbeing are feeling valued and appropriately skilled to do the job. Here Procurement can help by accessing the services of suppliers offering employee benefits and training solutions. I sincerely hope that once the pandemic is over the focus on employee wellbeing and flexible working will not end.
However, the pandemic has shown that it’s not just the way employees are supported that needs to change. For organisations in general, the balance between efficiency and business resilience needs to shift more in favour of the latter. For example, Just-In-Time works well when everything is “normal”, but during a pandemic, “Just-In- Case” would have provided better business resilience.
Resilient value-creating systems
The Harvard Business Review article, Why Investing in Procurement Makes Organizations More Resilient, advocates for a shift away from transactional procurement, towards developing value-creating systems. That requires a different kind of Procurement where the function acts as the orchestrator of such long-term value-creating systems.
So, what characterises these value-creating systems and what makes them more resilient? A value-creating system is centred around a key offering, which Procurement helps to bring about by building whole constellations of value, rather than just chains of value. In value crating systems the various actors may simultaneously be producers, sellers, buyers, partners, etc.
IKEA is an example of a company that has been operating in this way for a while. Its customers are treated as suppliers of assembly labour. Its suppliers are treated as clients and, therefore, given advice on bulk buying and use of equipment. In that way all actors co-produce value, rather than “add value” in the traditional sequential way. These business relationships, built on shared values, are a key source of business resilience. So, has that approach really helped IKEA during this COVID-19 pandemic?
IKEA – resilient or not so resilient?
The retailer has transformed some of its closed stores to fulfilment centres and worked with suppliers of serverless technology to transform its technology infrastructure across the business. The company is also using machine-learning data analytics to better understand customer needs. As a result of these initiatives, IKEA is now better positioned, than it otherwise would have been, to handle its doubling of online order volumes.
But all is not well at IKEA – particularly not in the USA, according to a Fast Company article entitled, Ikea’s e-commerce was already pretty bad. During COVID-19, it absolutely fell apart. Customers have experienced unfulfilled orders, delays with no end-date and other problems. It appears that, even though IKEA has established a culture of building value-creating systems, they simply entered the e-commerce game too late. When the pandemic hit, their systems weren’t robust enough to handle the sudden change without serious hiccups.
So, while focusing Procurement on employee wellbeing and on developing value-creating systems helps in terms of building business resilience, there are other strategic aspects to consider as well.
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