Conventional procurement and COVID-19

The Covid-19 pandemic has changed the dynamics of almost every single industry in the world. Alien concepts like social distancing, face masks have become the mainstream. Health concerns and safety armaments are in the spotlight.

The pandemic has confounded the humans but not the privation. Ironically, the business has no facemask and is left uncertain. The procurement process and supply chain management are still a Gordian knot to solve. There exists a huge call out for intensive health care and lab materials, infrastructure, and so on. The stumbling block is that there is only a limited consortium to match the needs of throngs of the consumers. Hence, the procurement process was left unhealthy and slipshod. Thus, direct negotiation has become a new theory.

This sour procurement lifecycle is not new to the town. 2008 has already challenged the procurement framework and had brought about a new paradigm shift.

The economic recession of 2008

The bankruptcy declaration of the fourth largest (that time) US investment bank in 2008 has generated a cosmic heatwave and liquidated the procurement system. This collapse has fabricated a steep and unprecedented decline in the global economy. As the economy went in a ball game, global trade has restructured with tight procurement and supply chain relations. Many external supply chains were in-shored. Only the firms that clutched with the suppliers has survived the jeopardy.

The contrast between 2008 and 2020 procurement liquidation is the cause of liquidation. The 2008 crisis forced a contraction in the demand chain while the 2020 crisis has inflated it.

Procurement challenges

• Finding new service suppliers
• Working with remote suppliers who are quarantined
• Identifying new suppliers and stakeholders
• Maintaining a minimal disruption across the supply and value chain
• Replacing contractors to meet the essentials, despite the living contract

Direct awards, a savior

The traditional procurement models have become inoperative. Thus, procurement leaders are called to design a better procurement model that flashlights on alternate priorities and services. Negotiation has become the new normal for business.

A good procurement practice is to opt for competitive tendering. The competitive tendering enables the procurement bodies to secure many goods and services at the finest cost. The pandemic now has wrecked the competitive tendering system, thus coercing us to adapt to the direct awards system, which has been discouraged across OECD members.

The procurement bodies are in-between the devil and the deep blue sea. When certain conditions are met, the direct awards are justified. The procurement procedure for non-emergency reasons disassociates from direct awards.

The contemporary Artificial Intelligent models have lent its hand to business survival. An AI-based Smart Sourcing system assists the procurement process by detecting the suppliers who can capitulate. This intelligent system has thus toned down the scope time by 75% and has cut down the marginal cost rate up to 46%.

When to adapt Direct awards?

• Despite the existence of a big pool of suppliers, time constraints have forced the procurement to keep away from competitive tendering. A simplified and lucrative business is compromised. Thus, the direct reward system can render its helping hand in this scenario.
• If there exists a solitary supplier, the procurement leaders are forced to adapt direct awards.
• When the existing contract cannot be used or renewed and when the contractor fails to meet the demand, direct awards uphold the process.
• The direct award process should be maneuvered only to address the current urgent needs. The unbiased needs procured through direct awards are complete snags.

Outsourcing industries were high flown. The impacts on outsourcing are contradictory around the world. Many business companies outsourced the procuring process to quick-witted procurement leaders, thus building out highly adaptive and cohesive procurement models. On the opposite pole, few business entities migrated from outsourcing as the contracts were cracked.

Outsourcing can also be an auxiliary action. As the demand for supply rises, business industries are crying out for procurement leaders and procurement tactics. Thus, freelancing procurement leaders are silk-stocking.

Cross-platform collaborations and adaptability are the pillars to survive procurement liquidation. COVID-19 has made the business industry hungry. The hunger will soon be fed by automation and artificial intelligence.

SHRUTHE