5. Balance security of supply with cost and cash improvements
Navigating today’s economic uncertainty, procurement organizations must strike a delicate balance between ensuring supply security and driving cost and cash optimization.
Leading category management planning is required to address this trade-off. After proper assessment of demand and supply factors, procurement leaders can identify relevant initiatives to their categories. Strategies will necessarily vary depending on supplier and buyer forces, from maximizing buying power to nurturing supplier relationships, minimizing inefficiency or diminishing supply disruption.
In the face of market volatility and material scarcity, a category manager might opt for design-to-cost initiatives with the objectives of minimizing supply disruptions on critical materials and maximizing supplier relationships. On the other hand, a category leader handling complex, competitive, and low-margin commodities might opt for supplier tiering or value leakage initiatives to bring visibility on supply dynamics and to protect negotiated value.
Eventually, the ability to adapt its procurement strategies to the ever-changing market trends and organizational priorities will be key to the resilience and value of a procurement function.
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Summary
By adapting the operating model to meet future trends in procurement, leveraging the power of GenAI, developing supplier partnerships, driving sustainable procurement practices and balancing security of supply with cost and cash improvements, procurement can position itself as a champion for value and growth creation.
Acknowledgement:
We thank Romina Levinta and Edouard Leroy for their valuable contribution to this article.