Economic woes, political uncertainty and digital disruption might trouble your CEO, but it should delight the CPO. After all, procurement can perform best on a burning platform, says Guy Strafford, Chief Client Officer, Proxima Group.
There has never been a better time for procurement. A combination of the economic cycle, global politics and digital disruption has brought ambiguity to the marketplace.
If, as a CEO, you are uncertain about your top line, wrapping your arms around the things you can control – costs – is the pragmatic approach to profitability. Costs incurred with suppliers represent the majority for the average large corporate, overshadowing even labour expenses. How will uncertainty impact each shift?
We have been experiencing slow economic growth for a while now. Financial crashes are typically succeeded by over ten years of slow growth, which means a new downward cycle may be imminent. In the context of record JSE and Dow Jones levels, and the FTSE not far off its high, it might seem strange to be pessimistic. But when Warren Buffett holds over $100-billion of cash, it seems to be an anecdotal indicator that we are nearing the top of a cycle. Being agile with your supply chain is now more important than ever, as you don’t want to get caught with high-priced goods and services, or the wrong inventory altogether as your market evolves.
Politics shapes and reshapes the global economy. More so now than ever, economic policies of the Democrats and Republicans, and Labour and Conservative represent a vast divide. Whether it is Trump or Brexit, coalition politics and political decisions are having a big impact on both the polity and the economic prospects.
Questions about trade, tariff barriers, regulation and corporate tax are now subject to divergent positions and disagreement. The answers could go in multiple directions, and so politics and electoral results are back to having a bearing on business certainties. Resolutions to these questions can take many different shapes and will bring some turbulent swings in the stock market and broader business marketplace. Since these issues are central to the way business is conducted, long-term cost discipline strategies aimed to give cover for the political uncertainty are warranted.
While not everything is going to be digitized or robotized (I hope a robot isn’t my next barber), the digital age has descended upon us. Some industries are further down the maturity curve than others – for example, both retail and finance have substantial legacy infrastructures that impact the incumbent ability to compete cost-effectively, and with agility.
All industries, however, need to optimise digitally; managing processes, metrics and data to inform short-term and long-term strategies to stay competitive and manage costs. With the emergence of cutting-edge technologies and the disruption of traditional business models, every company will require a hard look at their strategy to ensure they are embracing both the challenges and opportunities that come with advancing supplier-provided technologies and their effect on procurement.
Companies need to consider how the rapid rate of innovation will disrupt how their organisations work and line up their suppliers to respond. What a moment in time!
Add a dash of currency devaluation leading to import inflation, sprinkle in digital technology, and we could not ask for more ambiguity from the circumstances around us. Setting clear, agile strategy to control costs is the shrewd response to deal with the uncertainty of our times. Go procurement!