PROCUREABILITYTM WHITEPAPER © 2020 ProcureAbility Inc. to Navigating the CPO’s GuideThe COVID-19 INTRODUCTION of US have experienced The Coronavirus is creating extreme uncertainty 75% supply chain disruption as a result for us all, in both our personal and professional lives. The of the COVID-19 outbreak. effect will be far-reaching from a perspective, and COVID-19 has already made its mark by disrupting do not have a plan in place to supply chains, creating major supply imbalances, and 44% address these disruptions. impacting the operations of your own .

Early on, many of the shipping disruptions were coming items, such as personal protection equipment (PPE), to from suppliers based in China, but we are now beginning to protect their employees. In many cases, these efforts are see these disruptions across the globe as more government in competition with urgent procurement initiatives being organizations order citizens to stay at home, as well as pursued by federal, state and local governments as well as closing multiple ports and borders. high-priority customers such as hospitals, nursing homes and other medical facilities. Suppliers are facing challenges in terms of operating capability and financial stress. Manufacturing operations Your own could be significantly impacted as across many “non-essential” industries are being well. Your workforce is likely required to work remotely suspended for the time being to reduce their employees’ where possible, employees and executives may become risk of exposure to COVID-19. As measures to contain the sick, and the capabilities of your systems and processes are virus differ across borders, these supply disruptions are being put to the test. Employees new to working remotely likely to continue for much longer than just one country’s often find it challenging, potentially leading to a significant efforts. These disruptions will give rise to stock-outs for drop in productivity. This crisis is highlighting weaknesses some, forcing Procurement organizations to search for across organizations’ IT infrastructure, impacting their additional sources of supply. Procurement organizations ability to communicate and operate effectively throughout are pivoting from normal operations and sourcing new the new virtual enterprise.

THE NEW IMPERATIVE FOR PROCUREMENT Procurement organizations will be on the front lines of hand. It will be easy to forget strategy and focus on short- their companies’ battlegrounds and will prove to be one of term supply chain disruptions, supply shortages, supplier the most important corporate functions in navigating and issues and other immediate fire drills. These are now a executing new strategies for dealing with this monumental huge priority, and Procurement must step up and show crisis. Not only will Procurement need to address the and responsiveness to support and solve these immediate supply chain disruptions caused by COVID-19, it issues. Soon Procurement will need to shift its resources will need to rapidly re-think its overall goals and objectives, and focus back to mid- and longer-term planning issues align itself with the new corporate mission, and develop that will become equally important. new short- and longer-term procurement and category strategies. CPOs will need to fundamentally reshape their Once the dust settles, and everyone is clearer about the agendas to succeed in the newly constrained world. future, we expect a stronger emphasis on cost reduction. Cash flow will become a key focus due to: In the short term, Procurement organizations may need to shift focus from non-essential sourcing initiatives, reallocate • Lost or deferred revenue resources to operational support activities, and be hyper- • Lower productivity associated with new working rules responsive to address immediate corporate emergencies. • Higher costs associated with constrained supplies It is critically important, though, for Procurement organizations to maintain a strategic view of the issues at • New market pricing for strategic categories

(888) 824-8866 | ProcureAbility.com | [email protected] 2 WHAT’S NEXT? This new environment can seem overwhelming. There We suggest taking a short-, medium- and longer-term view are many unknowns, and the only certainty is that things of your priorities – addressing the issues at hand now, will change – many times – before we get a clearer while planning in the medium and longer term for more understanding of the impact of COVID-19. This is a strategic initiatives to deal with this situation and the new classic example of crisis management and leadership. environment. Our recommendations include:

SHORT TERM MEDIUM TERM LONG TERM (NOW) (1–6 MONTHS) (6+ MONTHS)

Keep your workforce engaged. Re-prioritize current initiatives/ Stabilize your organization as the Eliminate distractions and side projects. Develop a plan not only world returns to as usual. projects that are pulling resources for the crisis but also for recovery. Take stock of the weaknesses that away from the immediate business Coordinate with operations to have come to light as a result of this imperatives requiring Procurement’s determine what products can and crisis and develop plans to mitigate focus during this crisis. should be ramped up considering them in the future. supply constraints. Focus on the physical and mental Re-synchronize your well-being of your employees. Develop contingency plans for procurement strategy with the Don’t underestimate the anxiety and various risk scenarios: new corporate strategy, new supply stress of your Procurement team. − High-risk categories/suppliers market environment and updated Over-communicate, well beyond the demand forecasts. − High-risk regions norm. Offer non-traditional ways for your employees to deal with stress. − Demand risks (down now, Design more agile models and Ensure your team has adequate spikes later) technologies for communicating and collaborating with suppliers to guidance and support for working − People/resource risks remotely, in terms of equipment, help deal with supply disruptions guidance, new processes, and Update your category strategies. and changes going forward. Category strategies that currently technology. Create more streamlined exist are most likely outdated and/ processes for approving new Support immediate supply or irrelevant now. They should be suppliers or material standards, shortages/outages/requirements. adjusted to support short-term particularly in categories where immediate challenges such as Identify new sources of supply for extreme shortages or supplier current supply and supplier risks, immediate high-risk categories/ constraints exist. while also taking a longer-term view items. of the new economic and supply Provide support to corporate landscape. emergency initiatives. Renegotiate contracts, where Business will eventually return appropriate. Update processes, protocols and to normal, and in the meantime technology to support your virtual Identify and execute new you have the opportunity to team. initiatives required for new make your organization stronger Keep operations running smoothly corporate imperatives: by learning from the challenges with no disruption. − Cost-reduction requirements presented by a pandemic − Alternate sources of supply outbreak. Visit our website for more valuable information on − New categories weathering this storm.

(888) 824-8866 | ProcureAbility.com | [email protected] 3 CONCLUSION Ultimately, the effective and impactful CPO will help their Take note of the weaknesses that this upheaval is organization deal with the immediate emergencies, while highlighting within your organization and develop a plan to working on building a better Procurement organization for address these gaps in the short term and long term. Create the post-COVID-19 future. A resilient supply chain will be your new agenda to highlight the immense value that an needed to accurately detect early warning signs of potential effective Procurement organization can provide in times of disruption in the future and be able to respond by shifting crisis as well as in times of stability. to alternative sources in advance of the disruption. This will require a broader network of alternative suppliers, along with routinely updated supply chain contingency plans.

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