Inflation is still sky-high in Australia, and businesses are struggling to manage costs. While the peak of inflation may be behind us, financial analysts suggest we can expect a high inflationary environment for the foreseeable future. This presents an ongoing challenge for Australian businesses across all industries.
Despite 41% of CPOs focusing on mitigating the effects of inflation and delivering bottom-line savings, a majority have only just begun to make progress on their 2023 strategies.
They’re struggling to respond to the inflationary environment with agility. This is a real problem because an agile operating model allows procurement teams to protect their bottom line during economic uncertainty.
So, how do we combat this? Here’s where we’d start.
Data Visibility and Analysis: Key to Effective Cost Management
Inflation is eating up business profit, so it's more important than ever to understand your spending in detail. Unsurprisingly, CPOs are looking to improve the speed and efficiency of source-to-pay activities and reduce operational costs to mitigate the risks associated with inflation.
Spend review initiatives can drive cost savings, identify consolidation opportunities, overcome budget constraints and generate tangible value for your business. Visibility over key data sets can generate actionable insights to support better procurement decision-making.
For this to be effective, businesses need to clearly understand what they want and need to learn from their data, as well as quality data and data governance processes. Without it, businesses will likely invest time and effort in the wrong areas and exacerbate the problem.
To stay ahead of the curve, businesses can expedite this process using technology and expert strategic guidance. Done right, spend analytics can deliver meaningful insights that have the power to move the needle on improving operational outcomes.
Effective Supplier Management in a High-Inflation Environment
From the supplier management perspective, the inflationary environment demands active strategies to engage the market and strengthen supplier relations.
CPOs should focus efforts on supplier management strategies that unlock cost savings - contract management and collaboration, supplier negotiations, supplier performance reviews (current and ongoing) and market research. A strategic approach to supplier management ensures businesses are across industry trends and maintain a competitive position in the market.
It also pays to invest in developing productive supplier relationships that can identify opportunities for mutual benefit and deliver sustainable cost reductions. Procurement is in a key position between external markets and internal operations to drive value creation and fight inflation.
Our Procurement as a Service (PaaS) offers an innovative alternative to the traditional procurement service model. It gives businesses across all sectors a flexible procurement solution to face the challenges of the current economic climate.
PaaS leverages our procurement expertise to codesign a solution that elevates your procurement function. Our procurement specialists can partner with your business to respond to the inflation challenge with speed and efficiency. Contact August Consulting via our website or LinkedIn to discuss how we can support you to achieve bottom-line savings.
How do I beat inflation?