Inflationary pricing, volatility across global stock markets, and economic uncertainties are already a top concern for business leaders, and increasingly predictions call these trends to continue as we move into 2023.
The headlines offer mixed perspectives. The U.S.-based Wall Street Journal on the 27th of November published “The C-Suite Survival Guide to Inflation and Economic Turbulence,” and the Financial Times one day later reported that “UK Retailers Face Little Festive Cheer as Outlook Darkens.” On the other hand, Euronews also on the 28th of November said, “ it’s not that easy to tell ” if Europe is already in a recession, although acknowledged growing consensus that it’s coming.
This is putting even more pressure on Finance and Procurement in their annual budgeting and planning, as they look at where they can find yet-untapped cost reduction opportunities while also ensuring strategic goals are met and business operations continue without risk.
Keeping active oversight and tracking of your Procurement Performance is, of course, essential in times like this, but it’s also critical to use data to identify the right projects to prioritize based on the outcomes you need to produce. Additionally, you want to be ready to adjust as economic and market circumstances change. Having the right Spend Intelligence to feed your procurement planning and management gives teams the competitive advantage.
In a new SpendHQ guide just published for Procurement, we describe five use cases for Spend Intelligence to help Finance and Procurement navigate decision-making and goal-setting:
#1 Target spend that can be brought under management with preferred suppliers
“Maverick” non-compliant spending can lead to savings leakage and overlapping contracts. A good Spend Intelligence solution lets the team quickly identify spend targets that can be better managed in partnership with Procurement, in some cases being handled by preferred suppliers where negotiated terms are more favorable. It might also mean an opportunity to put new areas of spend through a competitive, strategic sourcing process to generate better results.
In one customer example, SpendHQ’s Spend Intelligence was able to help the company identify more than 35% in savings leakage from non-compliant suppliers.
#2 Navigate your spend history to discover areas of excessive costs
When Spend Intelligence captures a multi-year view of your spending and supplier history, it’s easier to benchmark a given category (or sub-category) across time and look into the details. Such spend history benchmarking can help you seeing if you have higher pricing in specific locations or from different suppliers, for example. It can let you compare pricing by timeframe, such as before and after current economic conditions, and to explore why they might have been trending in one way or another.
In another customer example, Spend Intelligence helped them see their facilities maintenance costs per square foot varied from $2.50 to $3.50 per square foot across locations. The customer used that benchmark to help renegotiate more favorable contracts.
#3 Use new insights to adjust as conditions change
While nobody can predict with certainty what the future will bring, Spend Intelligence should give you the flexibility to refresh your data at least quarterly to incorporate to update your insights. With this data transparency, Procurement can use those insights to better collaborate with the stakeholders across their business to get buy-in and prioritize your initiatives.
#4 Demand management options can be better evaluated
Demand management is another cost-saving method to consider when dealing with supply interruptions, uncertain economic conditions, or even downturns. It can include anything from reducing the variety of SKUs/items needed; proposing substitutions for non-critical goods and services that are available at a lower cost; and potentially reducing the frequency of or postponing certain purchases.
For one customer, SpendHQ’s Spend Intelligence solution was able to help a company save in the category of waste management, even though their preferred supplier was being used. Locations could choose either an open-top or front-loading waste dumpster, but on a per-ton basis, the team found that open-top dumpsters cost 4X more than a front-loading dumpster. The company was able to convert 85% of those item choices to the lower-cost option, saving significantly in this subcategory.
#5 Ensure ESG strategic progress even during economic challenges
ESG (environmental, social, and governance) goals and spend optimization are not mutually exclusive. Strategic company commitments to reduce greenhouse gas emissions, increase supplier diversity, and build more sustainability can benefit from good Spend Intelligence to help set procurement plans, goals, and track progress.
Get the Spend Intelligence Guide to Help Drive Your Procurement Performance
Using accurate, comprehensive spend insights and procurement project reporting combine to help you better plan ahead and prioritize your focus areas based on highest potential impact – especially during times of economic stress.