Ivalua NOW — Covid has changed companies’ boundaries: More opportunities for procurement

Earlier this month we attended Ivalua Now Europe, you can read our observations from the Ivalua keynotes in our overview here.

Of course Ivalua NOW wasn’t all about Ivalua – they had some excellent sessions on a variety of topical issues, one of which took our eye.

Natacha Tréhan PhD is a Professor in Purchasing Management from the University of Grenoble Alpes. She gave an informed and thoughtful presentation on the contribution of procurement to economic renewal. She believes “we can no longer copy and paste the past, the Covid crisis has highlighted the urgent need to rethink business models.” She explained the key future trends and how they impact business models and why innovation is crucial to economic renaissance. It was good to hear a concise explanation of what we mean by innovation in the procurement sense, and how procurement needs to rethink its role in innovation projects to explore new ecosystems and choose and manage suppliers to increase the success of innovation projects. “The role of procurement is to contribute to the transformation of the enterprise business model and to help the enterprise create data-driven strategies that are sustainable,” she said.

She shared her vision, from a researcher’s point of view, of what that means.

She cited an example of “the company that is so successful it doesn’t see why it needs to change its path.” The moral of that story, she said, is that “today’s success is the enemy of tomorrow’s success.” Successful companies can be suffering from “strategic blindness” and the Covid opportunity identifies a way to cure that. “Crises are great catalysts for change: they question competitiveness.”

She remarked that Covid has highlighted critical points of organizational failure in some sectors – like not knowing your tier-2 and tier-3 suppliers or finding that your contingency plans are not sufficiently deployed or that customers, distribution, manufacturing and procurement are not sufficiently connected. The main problem, she believes, is lack of available and good quality data, which reduces a company’s agility.

The crisis has also intensified the concern for CSR, for example China has committed to carbon neutrality by 2060 and the US has come back into the Paris agreement. More companies are concerned with their non- or extra-financial performance (to which procurement can make a huge contribution).

Products as a Service

Another accelerant from the crisis is what she calls the “servicization of the economy” and a data-driven strategy. The WEF says all products will become services by 2030. (She gave specific examples of where this might happen. An example in B2C is in the cosmetics industry where L’Oréal has developed a device using AI to find your perfect shade of foundation, or in the food industry where Mondelez can say it knows the traceability of its products because it uses a blockchain-based solution. And the trend is the same in B2B, whether we are talking aircraft engines or tyres. When companies like Safran or Michelin propose far more than products and develop solutions to optimise maintenance or decrease fuel consumption to reduce CO2 emissions.)

It’s a fairly new trend in economic systems, where data-driven strategies are starting to reshape the boundaries of companies. It’s important that procurement helps to develop those new strategies which will contribute to the transformation of the business model. But key to this is the building of a robust and resilient value chain. So it’s imperative to have a fully connected value chain from final customer to suppliers of suppliers. And of course the way to do that is to digitise all procurement processes – you see where we’re going with this!

SRM, CLM and innovation

Two areas that she sees as standout challenges for procurement as part of these strategies is to source renewable energies for the organization and to protect it from cyber-attacks. So it’s time to reshape supplier relationships (reiterating a recurring theme sweeping the boards this year).

The problem with that, she explained, is that companies’ interconnections are getting more and more complex: a company can be a supplier, a buyer and a competitor. Take Orange; it is a customer of a branch of Crédit Agricole, and a supplier to the bank, and a competitor to online banking. So procurement will have to manage more “copetition,” which means cooperation and competition at the same time (a new skill for procurement recruiters to find maybe?). That means they will need a holistic point of view.

She also foresees that procurement will need to reinforce links with sales and marketing because it’s more and more important to share data, and we should stipulate our ownership of that data in contracts. For that, the more digital your CLM the better.

Finally to innovation: Procurement must find suppliers able to support the transformation of the business model. We must complete the creativity of our people with the external innovation of our suppliers. And procurement must manage that innovation.

So supplier collaboration is key, but what makes a good supplier? If you think a good supplier is one that delivers on time, has quality products, the right certificates and is compliant, think again. That’s the “description” of a good supplier, she says. It’s whether a supplier is the right one for you that matters, one that is motivated by your strategies.

If your company is one of the many that says it hasn’t the time to fully engage with suppliers, then you need to digitize repetitive tasks, free up time and implement a system that can help you manage your suppliers. Let’s leave it there.

Registrants will be able to access this presentation in full, with all its rich references and examples, on-demand soon.

Ivalua NOW Americas will take place virtually April 27-29, read more and register here.