If you've been to the grocery store in the last couple of months, you may have noticed that your total costs are far higher than before. Prices on items like food, housing, gasoline, and utilities have risen by over 9.1% over the last 12 months – a 40-year record, according to the U.S. Consumer Price Index.
Why is everything so expensive?
A lot is working against the global economy:
- Covid-19 continues to affect manufacturing and logistics around the world.
- The war in Ukraine continues to have an impact, especially on grain production for much of Europe.
- The U.K. is facing unprecedented increases in energy price caps.
These combined events are the perfect recipe for supply chain shortages and drastic price increases.
All eyes on procurement
Businesses are facing uncertainties unlike ever before, causing CEOs to look closely at what is happening behind the scenes. Procurement is under scrutiny with central purchasing being pushed into organizations' spotlight.
One such question being asked of procurement is, "Do we have approved alternative sources of supply in place?" Building a diverse supply chain is key but not always easy.
You might source goods or ingredients from various vendors for a product you manufacture. Still, all it takes is one ingredient to be delayed because of rigorous testing, approval processes, or even that supplier's supply chain for the whole operation to halt.
This leads to today's reality, where products aren't available to customers, and organizations lose sales and market share. The following are practical solutions that Procurement teams can utilize to stay ahead of these issues.
How procurement can keep businesses afloat
The report, "How procurement must evolve to control risk" highlights that despite the challenges, there has never been a better time to be in procurement, and the key to the department's success is showing its value through:
- Investing in resources
Add team members or turn to technology to give procurement tighter control on its processes.
- Building a resilient supply chain
Prioritize risk mitigation strategies and put them to the test before a crisis to make sure they work.
- Effectively collaborating with suppliers
Form strong vendor partnerships by avoiding late payments and keeping an open communication line to resolve problems.
- Let digital take the strain
Will prices ever go down?
Not anytime soon, though economists predict that price surges should peak by the end of this year. For now, consumers and Source-to-Pay businesses will continue to feel the effects of high costs and a lack of products on shelves.
Now, more than ever, businesses need to adopt digital transformation tools such as eProcurement to stay afloat and adapt to our ever-changing economy.
Daniel Heinefeldt is the Vice President of Product Management at Medius. For more than 14 years, Daniel has been responsible for the product operations of Medius AP Automation, including delivery methodology, commercial responsibility, and leading project teams internally and throughout a global partner network. In his current role, Daniel directly manages the global strategy, product priorities, and roadmap execution in close collaboration with the executive team, helping Medius deliver innovative market-leading AI-based solutions for finance-led autonomous spend management.