Companies’ responses to coronavirus crisis ‘put procurement tools and technology at the forefront’

Now that businesses have been dealing with the coronavirus disruption for about six months, it’s time to check in with people on the ground who are helping procurement address the challenges.

Most companies have had to go fully remote in working with suppliers as employees work from home and cannot do in-person visits like before. Disruptions also include limited access to on-premise ERPs and other ways to keep in touch with suppliers and customers — like office phone directories and files kept at the office.

The crisis also has thrown supply and demand into disarray. While some companies lost business due to a lack of customers, others have seen a spike in the need for their products or services. With revenue streams shaken, cash flow concerns have led businesses to tighten up on spending. This dynamic has forced layoffs and the adoption of automation — and for some companies, they’re rehiring or using more contingent labor as the financial picture comes into focus.

So we talked with Diego De la Garza, Senior Director of Global Services & Delivery at the source-to-pay provider Corcentric. Since De la Garza works with businesses on a range of issues — from choosing the right technology or using consulting services or deploying new B2B financial options for customers — we wanted his insights on what’s happening at this stage of the crisis.

“For those organizations who recognized procurement as a function with strategic value, the current state of events worked as a catalyst to propel their relevance and elevate their role, which immediately put procurement tools and technology at the forefront,” he said.

Q&A

Spend Matters: Because you work with companies directly, how are they coping with the coronavirus disruption and work-from-home issues, like their ability to collaborate with suppliers and serve their customers?

Diego De la Garza: We’ve seen the gamut. Naturally, the way companies have coped (and continue to do so) depends on the industry in which they operate. When working from home, there are two perspectives: One is internal collaboration and team coordination, the other is external supplier relationship and customer management. I feel that on the personal side people have learned to recognize children and working spouses as part of the equation, while our human nature has let us adapt it to make it part of the small talk and rapport-building conversations of daily lives. On the internal communication, teams have learned to adapt their company culture to their collaboration model in a rather sustainable way.

On the supplier side, I see things being more complex, there are operational concerns for those organizations that rely on facilities being serviced, that rely on delivery, adequate inventorying, logistics management, etc. On these relationships, I have seen the following trends somewhat consistently:

• Companies talk to their suppliers more. Probably to fill the vacuum left by in-person interaction or to create a better sense of connection and process compliance.
• Companies are relying more on data and reporting. Companies are turning to data to measure market trends more closely. They want to ensure that the tactics and strategies they are employing to survive or capture a competitive edge are working in expedited fashion. Technologies, especially in the source-to-pay space are becoming more and more relevant, and things that were seen as operational before, such as spend analytics, are gaining strategic relevance.
• Communication technologies are being used more and better. I don’t believe I used Zoom or Teams with my customers at all before April of this year. Many of the companies we work with had internal systems that they used before, but conference calls we still made with Polycoms only. Now, “let me share my screen” is part of virtually every meeting.
• Suppliers that communicate more are doing better. Because everyone is finding newer ways to be “close” to their customers, suppliers are reaching out more — for the most part. And those who do seem to be building better relationships, can share results and progress more frequently, and therefore resolve issues promptly. We are seeing the same with our customers, who are asking us more and better questions as we reach out more frequently and are using our time more efficiently. Onsite visits take time on both sides, virtual meetings are purposeful, in essence, so business outcomes are forefront of every discussion.
• Many companies are working more, productivity still ties to corporate culture. This is simply a trend we hear a lot. Without a commute, there’s time to do more, but we also hear a lot of distractions at home that are inevitable and hard to eliminate.
• Pressure hasn’t gone away. Need I say more?

In a way, supplier relationships are seeing a shift in communication, but quality and quantity have improved. Companies are more proactive in managing relationships and becoming more efficient in how they communicate and demonstrate results.

Have you seen a change in approach in the last six months — since the onset of the crisis?

Yes, adaptability and a need for resilience. At the onset of the crisis, many companies did believe that a month would be it and were supportive of the local regulations, but the majority did not adjust their business model.

When two months became three, we started to see a drastic shift in how companies prepared to secure healthy financial ratios and the operations behind them that would provide a level of stability.

Six months into it, many companies are going into quarterly budgets and PNL reviews, suspended or halted work tied to professional services providers and of course furloughed a significant amount of their workforce leading to many of them evaluating short-term staffing so they don’t carry overhead. For companies that had digitization, process optimization and redundancy elimination in their strategic roadmap, acceleration was the name of the game, and those who didn’t have it made it a priority.

Are companies now more likely to consider technology solutions that can give them greater visibility, feedback and control of how they deal with suppliers, how they handle money/manage spend, and how they need more insights or analytics of their operations? It used to be a tough sell for procurement to get the C-suite to see the business case for more automation or analytics. What’s it like now?

I really like this question, and it is hard one to answer in a simple way. But for those organizations who recognized procurement as a function with strategic value, the current state of events worked as a catalyst to propel their relevance and elevate their role, which immediately put procurement tools and technology at the forefront. Rather straight-forward conversations at the C-suite started to position spend visibility, spend management and supplier rationalization as critically relevant. We started hearing a lot of: How do I eliminate rogue spend, minimize tail spend, control P-card spend, ensure compliance, and gain visibility through the entire process? It is resonating at the highest levels of the organization that procurement maturity, supported by procurement technology has a direct impact in financial stability and increases working capital.

What kind of companies need to begin digital transformation, and what kind of companies need to expand on their basic digital capabilities?

This question implies that no matter what, companies need to be looking at their digital capabilities. And I could not agree more — that is the core of the matter.

It all starts with data.

Every company, no matter how mature it thinks it is, needs to have a profound understanding of their digital capabilities — that is, how much value is in their data to drive strategic decision-making. This means, how easy is it for the company to extract and analyze their own data, how easy it is for that data to be enriched with market intelligence or benchmarks, keep relevant and ultimately tie to a visible process. We’ve heard companies tell us “we have great spend data” when it lacks the fundamental attributes to derive any meaningful conclusions, while others say “our spend data has a lot of issues” when in reality, it is sufficient to build a roadmap.

Both companies have work to do in really understanding their data, and likely their tools in place lack the capabilities, or the users don’t leverage them adequately.

Digital transformation starts with knowing where data comes from and how to analyze it. The rest is all about enabling the right tools and systems to the technology supports the right process. Simply put, companies with tools and technologies in place that don’t support compliance and whose data is easy to digest should undergo a digital transformation. On the other hand, companies who don’t know their true value of their spend data, must begin by expanding on their basic capabilities. At Corcentric, not only do we offer tools and technologies to support any digital transformation irrespective of procurement maturity, we assist scores of organizations understand where they are in the digital curve and where to go based on their strategic priorities.

Do you have a favorite story about how a company has addressed its coronavirus disruption problems — or how Corcentric has helped deliver technology, services or financial options?

One $15 billion manufacturer that we work with recently went live with a full managed services initiative that is delivering a guided-buying solution all the way through payment across hundreds of facilities globally. We’ve learned a lot together in the past 18 months, from scoping to implementation, all in the midst of the pandemic. Frankly, a lot of what I expressed in previous questions is a product of the lessons we learned as a result of collaborating with this company. We learned how to work more closely and resolve more efficiently. But most importantly, the pandemic acted as an accelerator to get everything in place in order to increase process efficiencies, eliminate tail spend and fulfill the company’s vision for full digitization by 2025.

Through this process we are delivering state-of-the-art technology, with a guided buying element that enables all requisitions to become compliant POs, and it accelerated the payment cycle to the supply base, offering dynamic discounting and in some cases supply chain financing. It is an entire source-to-pay delivery story that not only managed to deliver a solution but it thrived in the middle of the pandemic. This company is positioned to save millions of dollars a year based on this solution alone, without impacting their workforce or otherwise reducing operations. That makes it a favorite example of Corcentric’s work in my book.