By Zwelijongile Gwebityala
As governments and businesses dealt with the Covid pandemic one of the overlooked challenges they faced was the strain on procurement processes. Government found itself needing to accelerate procurement of essential and protective goods, in ways that government simply was not used to buying goods before.
We later saw with the numerous corruption cases related to Covid procurement, that perhaps more needed to be done to safeguard the public purse while accelerating procurement. On the other hand, the business sector had to deal with massive disruptions in their supply chains. This had the impact of increasing input costs or disrupting production as businesses struggled to find alternative suppliers.
One of the benefits of Covid has been the rapid pace of digitisation that had to happen to keep economies moving. And as lockdown restrictions are relaxed and organisations go back to old ways of working, the rapid digitisation of the past two years offers an opportunity to keep some good practices.
With regards to procurement, digitisation and automation of procurement processes has offered organisations the ability to purchase much quicker, without a significant increase in risk. Organisations are also able to reach a far wider number of potential suppliers by partnering with cloud-based sourcing tool suppliers that offer extensive catalogues from a global pool of suppliers.
This has the dual impact of increasing the pool of potential suppliers as well as reducing prices as purchasing organisations have more options. Added to this, the ability to use technology to run reverse auctions or to track prices from a global pool of potential suppliers, further improves the ability to drive prices down.
Of course, sourcing is not just about trying to buy goods and services at the lowest price. Sometimes additional considerations such as supplier reliability, supplier development and BBBEE amongst others, need to be taken into consideration as organisations seek to optimise their spending. Up to now these additional considerations have tended to be left entirely to the discretion of sourcing specialists.
However, as technologies such as rapid process automation, optical character recognition and big data become more prevalent, these are making their way into improving how organisations spend.
Today, it is possible to automate the process of tracking when suppliers breach their contract terms, or verifying BBBEE credentials via online tools, or indeed estimating - rather accurately – future demand for certain commodities, based on historical data.
Previously, all these sourcing related activities required significant human effort and were replete with human error.
We are not at the point where technology will replace the need for humans in running sourcing activities of large organisation. We might never get there. However, technology greatly aids the sourcing process by freeing up staff to focus on the more strategic elements of sourcing.
Activities such as aligning with their organisation on their spending priorities, ensuring that large projects are sufficiently supported with the inputs they need, managing supplier development programmes to grow local suppliers are but a few activities that the world will continue to struggle to fully automate.
It is worth noting that technology is not the panacea to resolving all the challenges that beset organisations purchasing activities. Even now, purchasing departments in many organisations are an afterthought, only consulted once organisations have decided on their spending priorities only to manage the execution of that which has been decided.
Indeed, many are seen as compliance departments that slow down projects as they insist on complex procurement processes that can sometimes take months to complete.
However, nothing could be further from the truth. In our experience, those organisations that have clear and upfront strategic alignment between sourcing departments and the rest of the organisations tend to do better in saving and accelerating procurement processes, rather than slowing them down.
In addition to technology, organisations need to think about their end-to- end approach to sourcing, including their approach to category management, the capability levels of their procurement people and the adequacy of their procurement processes to support agile business delivery while safeguarding the organisation’s money.
As organisations begin to ramp up their production and service delivery, they will need to work carefully to avoid the traps that saw hundreds of millions in value lost due to additional costs and project delays. The amalgam of technology and humans in the procurement space is long overdue, but here.
* Zwelijongile Gwebityala is a Managing Director at Ntiyiso Consulting where Enock Mutangara is a strategic partner focused on supply chain management