The Pandemic's Impact on Marketing Procurement
To say that the COVID-19 pandemic had an immense impact on most industries would be an understatement. According to the International Monetary Fund (IMF), the "Great Lockdown" that resulted from the pandemic caused the worst economic downturn since the great depression.
For procurement professionals, much of the pandemic's impact was felt in the supply chain. As shipping ports, airports, and transit lines shut down, it became increasingly difficult to source necessary goods. Many organizations migrated to digital spaces to continue doing business, and there is evidence that digital interaction will be a centerpiece for business moving forward.
Now, procurement leaders are assessing what the pandemic means for the function in the long term, especially as the world experiences a resurgence due to the Delta variant. Here are a few insights into how the pandemic affected procurement over the past two years and what it means moving forward.
The Impact Wasn't the Same for Every Industry
The first aspect of the economic contraction to recognize is the fact that it wasn't felt equally by every industry. Some industries even experienced positive results due to the pandemic, at least from a business standpoint.
For example, the travel, hospitality, and leisure industries suffered immensely due to a grinding halt to air travel and lockdown orders across the globe. Not only were frontline employees put on leave due to a lack of business, but procurement professionals struggled to source the goods and services necessary to keep operations running. Technology and automotive companies also suffered from a shortage of microprocessors due to spikes in demand and supply chain disruptions.
Other industries had mixed results due to the pandemic, and others still saw significant success. Retailers struggled due to store closures, but many were able to sustain themselves through digital and eCommerce sales. However, retail procurement professionals struggled to source some goods—according to Retail Dive, the outbreak rendered almost 9% of container shipping fleets inactive by February 2020.
Many companies in digital-first industries, like software, saw success during the pandemic. Video conferencing tools rose in demand, and the video game industry thrived. Many marketing firms also faired well, as companies needed to shift their messaging significantly to address the current point in time.
Some Marketing Vendor Categories Were Hit Harder Than Others
Significantly, many organizations that depend heavily on services that can be sourced remotely were able to maintain their resilience during the pandemic. For the most part, marketing procurement leaders were still able to source services from agencies, freelancers, and creative outlets.
Meanwhile, companies that depend heavily on sourced goods like paper for their marketing struggled.
Vendor categories like the events and print were hit harder than digital categories, and they may take more time than others to recover. According to McKinsey & Company, even in a "muted recovery," it could take more than five years for the most affected sectors to reach 2019-level contributions to GDP. McKinsey predicts that manufacturing as well as the arts, entertainment, and recreation sectors won't recover until 2025 or later.
Marketing leaders must take steps now to diversify their supply networks and breed resilience into the supply chain. While there are no easy answers to this challenge, some best practices have already been laid bare by those organizations that stayed resilient during the pandemic.
For example, Gartner recommends companies diversify their sourcing bases for manufactured goods substantially. Depending on a single company, country, or region for products like paper can create risk. Although retaining multiple supply locations can be costly, it is worth it to avoid massive disruptions in operations.
Strong Supplier Relationships Became More Important
One thing the disruption did reveal is that companies need to build strong supplier relationships, especially if they hope to withstand disruptions in the future. This is true of sourcing goods, but it is also true of relationships with outsourced marketing vendors.
Building a strong relationship with marketing partners ensures the company can get the most value out of its agreements. A strong relationship can also grant the company more flexibility with agencies and other vendors in the event of a disruption or if their marketing needs change overnight. Agencies tend to be more willing to accommodate clients with whom they have long-term relationships.
Still, it's important to anticipate the agency's point of view. Agencies that feel their clients are taking advantage of their flexibility may be less inclined to renew those agreements. It's important to strike a balance with marketing providers, as they too need to consider how they'll withstand the next disruption.
The pandemic's impact on procurement is set to be a hot topic at this year's ProcureCon Marketing conference, taking place this December 6th to 8th at the Hyatt Regency La Jolla in San Diego, CA.
Be sure to download the agenda for more top insights and challenges facing the industry today.