‘Procurement can lead’ the COVID-19 response — with digital capabilities and agility, Corcentric says

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The COVID-19 crisis has accelerated the need for companies to digitize, but they still need to understand how to do that as they deal with the current disruption, a worsening economic downturn and a new business landscape after the rebound.

For any business considering digital transformation, an assessment needs to be done on which departments to begin with, what technology to add, and which tasks to automate or outsource.

Some companies may want to beef up IT to gather big data, and others may start by considering an overhaul of their financial departments.

But the coronavirus disruption has put the spotlight on procurement departments. CEOs are skipping IT and CFOs to go directly to Chief Procurement Officers (CPOs) for answers. Executives are getting insight from procurement — like the state of a company’s supply chain, risks from suppliers and visibility into spend.

Companies of all sizes now realize that they need procurement with more agility. To find out more about that capability, we talked with Joe Payne, Senior Vice President of Source-to-Pay at Corcentric, a leading global provider of source-to-pay, order-to-cash and fleet solutions.

“A lot of our customers are really recognizing that through this crisis, procurement can lead,” Payne said in discussing how pre-COVID thinking about the digital transformation of business has been altered. “It's an interesting time to be in procurement.”

Q&A

Spend Matters: What does procurement agility mean to Corcentric?

Joe Payne: The topic of procurement and agility has come up lately, and I've adjusted my thinking on it.

So I always thought of agility as being very reactionary, the ability to react quickly as new events, or new things come to you, but now I think of it as the ability to anticipate. Part of it is certainly reacting and being able to pivot quickly as new information becomes available, but in that general sense of knowing where something is headed and be able to anticipate a problem is just as important. That forecasting is really critical and a big component of agility.

Thinking about pre-COVID days, if you look at any study then about disaster recovery, almost every scenario is regional in nature. There's a power outage, there's a weather event, a natural disaster, maybe even a political event, or a war. All those things are regional. But on the list of global catastrophe, it's like zero percent of disaster recovery efforts were really tied to a global disaster like the coronavirus that impacts everywhere.

So now I think agility is going to be a lot bigger factor for procurement because of that.

With the coronavirus disrupting business operations and supply chains, what needs are you seeing from the CPOs and CFOs?

Procurement agility is coming up for sure. For a lot of our customers now, procurement is being brought in as a leader. "Oh my God, we've got these problems we need to solve around supply chain, or this economic downturn, and we need to save money." The head of procurement is now sitting in board meetings, where they weren't on the board before. Now they're there, they're getting questioned, and they're strategizing at the board level.

Our advice to our customers is to think both in the short and the long term.

Many customers have come to us and said, "We've got cash-flow issues and we need to save money. I'm thinking about asking all of our suppliers for 10% cost reduction," or "I'm thinking about extending out our payment terms another 30 days to net 90 or net 120."

The reality is those will reap short-term benefits, but in the long term, the suppliers are just going to get upset, because they have their own problems and now they're just being asked indiscriminately for cost reduction with nothing in return, or extended payment terms at a time when their cash flow is also being negatively impacted. They're already suffering, so they're going to look to get that back and more whenever they have a chance to.

But if you think about it more strategically and consider both the short term and long term, you can still identify cost-savings opportunities. It might be a little more work right now, but if you go to your suppliers and really work closely with them and see what's important to them, what can you help them with while at the same time getting what you need. Those more collaborative relationships are going to help you now, but also in the future and potentially differentiate you from all the other customers that are asking for 10% cuts.

It's a natural time to be reactive, but you're also being asked to be a leader right now, so think strategically and think long term.

What role is procurement agility playing now that people are working from home and companies have fewer workers?

In the procurement world, what's really important about this work from home and furloughing is to start thinking about changes in the way agreements with suppliers are structured, and really rethinking the oldest assumptions about the way business has been done.

So if you consider all the key indirect expense — IT, telecom, office space, office services — all these things need to be thought of differently. Your volumes are going to change, your deliveries are going to be different, your touchpoints with suppliers are going to be different, and ultimately your contracts are going to need to reflect that.

In that environment procurement, more than any other area of the organization, is qualified to holistically look at the problem of a changing work environment. In other words, let’s not just look at this one problem, but all the company's problems tied to this change and figure out where are the top opportunities spread for rationalization, for cost reduction or for process improvement. That can be a procurement-led initiative if they come to the table with those ideas.

When you talk to businesses about a problem they have, how do you find out what’s holding them back?

There are four big issues:

  • Cost-savings and cost reduction are always critical issues. You need real-time visibility into supply markets, the competitive landscape and the skillsets/market intelligence to optimize cost.
  • Value, meaning the perceived value of procurement in the organization. The perception problem is that procurement is seen as reactive or even antiquated. But procurement agility can be attained and when done properly, is highly recognized across the company.
  • Adoption, being willing to call in procurement and its technology solutions. People just don't understand the way good procurement can be done. You still see the problem of individual departments trying to solve their own problems and not bringing in procurement when they can.
  • Compliance, which is making sure everyone across the business knows the procurement policy and follows that. (Technology like e-procurement catalogs with set prices can help.)

With the technology and with guided buying around procure-to-pay technology, you can basically build the rules into the system and it solves that compliance problem. It helps the business know when they should bring in procurement, or when procurement's supposed to be involved, but it also drives adoption, and it makes sure the processes are being followed.

Then if you're looking to go outside of the process, it's harder for you to do that than to follow process.

A big portion of customers are coming to us because they need technology.

They don't need technology because it's the cool thing, or they just want to have AI or automation, it's because they have one of these business problems.

They're struggling with adoption, they're struggling with compliance, procurement perception, or cost savings, and they're looking for tools to help them do that. So that's what we're bringing to them is, "OK, let's talk to you about those business problems, and what are the right things we can bring to the table to help solve for that?"

Beyond the e-procurement catalogs, what other technology are you seeing that companies need to adopt — especially if there's this perception problem outside the organization, and for some people inside procurement who may not know all of the technology options available to them today?

To us, it has a lot to do with the maturity of their organization in terms of procurement. Are they a customer that is in a newly formed procurement organization? Maybe they didn't have centralization of indirect spend and they're moving that way. Then they need technology to gain visibility into spend.

A lot of customers today, even those that are more mature organizations, still struggle with spend visibility and understanding what the business spends money on.

When you go into those businesses struggling with that, they might have data, but it's more coded toward the way finance or accounting would look at spending versus looking at it with procurement’s eye for categories, market baskets, and how do these suppliers fit together from a leveraging perspective and consolidation perspective. I think that's always the critical starting point is, “What am I spending money on today?”

But for us, we're a blend. So we're a technology company, but we are also emphasizing services and other options, like our GPO.

If you're in that early stage of maturity, you also are probably looking for quick wins; you want to show that value of procurement very quickly and make it easy for the business to recognize that you can save money if you use procurement. So, as much as spend visibility is important, hand in hand with that is, “What are my targeted opportunities?” So some benchmark data that would tell me based on the spend, where do I focus my efforts, and then what are the levers that I can pull? Maybe it's using a GPO, maybe it's running a sourcing event. Looking at those opportunities is another aspect of technology.

Spend visibility is critical. If you're a more mature organization today, the tech that works for the business is really important. So, you've gotten the internal customers that come to you and to work with you, and you spend all that time developing those relationships. Now it's so important to put in that P2P technology or that tool that makes it easy for them to buy the right things at the right time from the right suppliers.

It just depends on where you're at on the maturity curve really.

Before the coronavirus crisis, some technology probably seemed like a luxury, not a must-have feature. But now with fewer workers, increased risk and the CEO asking for more insights, do businesses understand the need for technology and the ROI it can deliver?

There's a pre-COVID and post-COVID answer to that.

In the pre-COVID world, customers would even ask for a business case for something like invoice automation …

Like, "How much are we going to save when we move to invoice automation?"

It was always a curious question to me because I would think, "Do you really need a business case for why you should have digital invoicing versus paper-based?”

Think about how antiquated AP organizations are that are still accepting paper and writing checks. If a company still needed a business case, of course we would do that. It's very easy to show that the ROIs are huge.

Today, there’s not as much talk about the ROI because they just lived through the pain of dealing with manual processes while everyone is trying to work online from home.

For companies that were paper-based, where are all those paper invoices going now???

Obviously now they've got to get people to go to offices, even though they're shut down, go to the post office, or have mail delivered to people's houses. All sorts of things you don't want to deal with. So the pain that they've experienced through this process has made the dollars and cents of a business case for technology a lot less important, and the reality of, "Yeah, we need to digitize. We probably should have digitized a long time ago," is much more evident for a lot of companies right now.

But we're still in a COVID world. We're not post-COVID yet.

There's an economic downturn that we're anticipating that it's going to come with this that's already starting. So the question for us is not "What's our ROI?" Right now, the question more for the customer is, "Are we going to have funding for this?"

With all the capital expenditure freezes and the anticipated economic downturn, when are we going to get the funding for what we need: digitization of a procurement process, a sourcing process or an AP process.

We're trying to work with customers now to find creative solutions to those problems.

You mentioned that Corcentric has GPO and managed services. How do you help a customer judge what technology they should take on and what processes they should outsource?

The technology question and the option for outsourcing go hand in hand.

If a business is looking to save money, they probably need a spend visibility tool. They may need a sourcing tool.

But then if you look at the other things that Corcentric can bring, our GPO programs can be kind of a rapid approach to saving money because we've already built these pre-negotiated programs and we've leveraged aggregate volume of multiple customers to help them quickly identify and implement a cost-saving solution.

On the services side, if their teams are lean, if they don't have the ability to add head count, or if they're a mature organization and they're trying to get more efficient and effective, there's going to be a segment of your spend, or a component of your overall volume, that is just not going to be efficient for you to manage.

Many businesses have addressed the coronavirus crisis as best as they can in the short term. But what still needs to be done now, and how should a CPO prepare for the long term?

Fix the bottlenecks. This pandemic has shown companies where their weaknesses are — it could be a supply chain issue, a process issues or a technology problem — now that they are brought to light and evident, fix them.

The other piece of that is on the procurement side. A lot of our customers are really recognizing that through this crisis, procurement can lead and really has value to bring to an organization. Procurement leaders are reporting up the board, and they're being asked to do more.

I would encourage the CPO who has this newfound access and success to think about what you're going to do with that power.

We always talk about getting procurement a seat at the C-suite table.

Now's the time to think about the best that procurement can do, from a strategy perspective, but also from a technology perspective, from the ability to invest in your team, to get them trained and get them more efficient. Don't squander the opportunity.

Does Corcentric educate CPOs on how to interact with executive-level leaders?

Yes. What we do for customers is really try to increase the value of procurement in the organizations they support. Coaching on how to get the seat at the table and maintain it is a big part of what we do when we're helping stand up a centralized procurement function and bring a CPO in to support the business. Our ultimate goal is for our customers to understand the true value that good procurement can bring to an organization.

This Brand Studio post was written with Corcentric.

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