Concerns about rising inflation have been a hot topic in boardrooms since the start of this year. These concerns have grown substantially after recent news that US annual consumer price inflation has jumped to 4.2%.
Many businesses are already feeling the impact of rising prices, which are pushing their costs higher. Now is the time for businesses to act and ensure they keep their costs under control.
Inflation is just one of the problems on the table. Here’s some of the biggest challenges we see facing our clients this summer and how we’re advising them so they are in a position to thrive.
Beating inflation
There are a number of steps that businesses can take to keep their costs down while inflation is pushing prices up. First, businesses must identify areas where efficiency gains can be achieved and work in partnership with suppliers to find new solutions. This may sound simple, but it is much more challenging to implement.
It’s especially difficult when you don’t have access to the right talent. It’s possible your procurement team has managers or executives who cover multiple categories of spend. It is not realistic to expect them to be an expert in every area, yet to deliver best-in-class savings you need to have an in-depth understanding of the specific spend category you are looking at.
This all means there is a need to find immediate capability solutions – either by bringing individuals on-board who can address your needs or by drawing on consultancy expertise to deliver.
Leveraging digital technology
To understand where you can find opportunities for savings, you have to start with a clear understanding of where you are spending money. Many companies still don’t have this level of visibility, in many cases, that’s because they have not yet started to or have not successfully implemented digital tools into their procurement function.
There are now a range of technology solutions in the marketplace that, when properly used, give you a much fuller picture of your costs and provide a greater ability to manage suppliers across spend areas. Conventional spend analysis tools have come a long way, and today can represent enriched data sources that tell you critical information about your suppliers, costs, risk exposure, and more.
Embracing digital can help to get a handle on what you spend, not just mitigate the cost impact of inflation and also provide a baseline from which to drive fundamental performance improvements and resilience.
Engaging with supplier sustainability
We know that consumer preferences are constantly shifting but one of the biggest changes in recent years has been the rise of the socially conscious consumer. They are now driving huge changes in the world of business – with ESG and supplier sustainability rising to the top of everyone’s agenda.
With most of an organization’s costs going externally, supply chain sustainability is now a priority for many procurement teams – and for those who it isn’t a priority, it soon will be. While it’s a priority, it isn’t easy. It can be difficult to find data and there will be trade-offs and decisions to make – for example some services are difficult to move, or some sustainable choices will add short-term cost. So data needs to be understood and decisions thoroughly thought through.
The real challenge is “knowing what to do”. Conventionally national and organizational targets can only be met by tackling ESG in supply chains. Without a cohesive strategy for how to do so, organizations not only risk missing targets, but also are likely to make decisions that add costs, in a year where we are trying to contain them.
Inflation may be rising but the US economy is also shaping up for a year of growth. By utilizing talent to control costs, leveraging digital technology, and embracing a sustainable supply chain you can put your business in a position to thrive this year and be ahead of the game for years to come.
Click here to learn more about Proxima’s services to set you up for a summer of success.