Over the last couple of years, the cost-of-living crisis has become a pressing concern for many people and businesses in the UK. The surge in prices for essential goods, transport and services has had far-reaching consequences on individuals, families and businesses. One area significantly impacted by the crisis is procurement teams – the unsung heroes working tirelessly behind the scenes to secure goods, works and services for organisations.
How is the cost-of-living crisis directly affecting procurement?
Here are some of the common issues:
- Rising costs and shrinking budgets
As the cost of living continues to soar, procurement teams are grappling with a double-edged sword. On the one side, they must navigate the rising prices of goods, works and services. On the other side, departmental budgets and resources are often constrained, making it increasingly challenging to find cost-effective solutions without compromising on quality. The pressure to achieve value for money while ensuring the delivery is immense.
- Market volatility
Increasing inflation often leads to market volatility, with fluctuating prices and unstable supply and demand dynamics. Procurement teams must constantly monitor market conditions, stay informed about price trends and adapt their procurement and sourcing strategies accordingly. They may need to explore alternative suppliers, negotiate better contracts or seek out new sourcing opportunities to navigate the turbulent market landscape.
- Supply chain disruption and shortages
The cost-of-living crisis has been further exacerbated by supply chain disruptions and shortages making it even more challenging for procurement teams to access the resources they need. Disruptions cause by unforeseen events, such as Brexit, Covid, war in Ukraine or other geopolitical issues, have led to delayed deliveries and increased lead times. This uncertainty forces procurement teams to think creatively and establish backup plans to mitigate potential disruptions.
- Ethical sourcing and sustainability
Procurement teams are not only considering financial aspects of the cost-of-living crisis, but are also having to focus more on ethical sourcing, social value and sustainability. Consumers and stakeholders are increasingly demanding that organisations uphold responsible and environmentally conscious procurement practices. However, doing so while also keeping costs down can be a balancing act that requires careful consideration and collaboration with suppliers.
How are procurement teams approaching the challenges of the cost-of-living crisis?
These challenges are placing immense strain on procurement teams; however, many are rising to the challenge with resilience, creativity and determination. Let’s look at how:
- Adapting procurement strategies
Most procurement teams are not just sitting idly by, waiting for the storm to pass. They are proactively seeking innovative ways to adapt their procurement strategies to align with the changing landscape. This includes exploring new supply chain partnerships, renegotiating contracts, and embracing technology to enhance efficiency and transparency.
- Leveraging data and analytics
In response to the cost-of-living crisis, procurement teams are turning to data and analytics to gain deeper insights into market trends, supplier performance and cost-saving opportunities. By leveraging data-driven decision-making, they can make informed procurement choices and strategies that yield the best outcomes for their organisations.
- Collaboration and knowledge sharing
Procurement teams across different sectors and even across the world are facing similar challenges, and they are recognising the power of collaboration and knowledge sharing. By working together, they are pooling their experiences, insights and strategies to weather the storm collectively. Networking events, conferences, online forums and webinars are playing a vital role in facilitating these collaborative efforts.
- Public sector response
Where you are central or local government, an NHS Trust, a Housing Association, Higher Education or any public sector body procurement teams are not immune to the effects of the cost-of-living crisis. With increased pressure to deliver services while operating with limited budgets, they are focusing on building strong relationships with local suppliers, streamlining procurement processes, and seeking grants and funding opportunities to support essential services.
How can we – as procurement consultants – help your organisation at this time?
It may seem counterintuitive to suggest help from external resources when costs are high and budgets are stretched. However, procurement consultants, like us, can play a critical role in helping procurement teams to successfully combat the challenges they face – and we may be able to offer our services with no direct cost to you through a supplier-funded model, or drive such significant savings.
Our team of procurement consultants stay constantly updated with market trends, industry dynamics and price fluctuations. We can provide you with valuable benchmarking insights and strategic insights that you may not hold internally. We can compare your performance with industry standards, identify areas for improvement and recommend best practices to optimise processes, reduce costs and enhance efficiency. This knowledge transfer helps your procurement team implement proven strategies and stay ahead of the curve.
Effective Supplier Relationship Management (SRM) is crucial during times of crisis, we can assist in evaluating existing supplier relationships and identify opportunities for collaboration, negotiation and risk management. Our SRM experts can also help you diversify your supplier base, explore alternatives and build stronger relationships with key suppliers to help mitigate the impact of inflation.
We can also help save costs by conducting spend analyses, evaluating procurement processes and recommending improvements to optimise costs without compromising quality. This may involve renegotiating contracts, exploring volume discounts, implementing more efficient procurement systems or identifying alternative suppliers that offer better pricing or value.
Finally, we can support change in your organisation. Difficult economic times often come hand in hand with high levels of change. We can provide guidance and support whilst you navigate any resistance or challenges that may arise, ensuring business as usual and a smooth transition to maximise the benefits of any changes implemented.
If you’re worried about any of the challenges we’ve highlighted above, are looking for additional support or want to investigate how you can save costs, we’re just at the end of the phone.
Give us a call on 0333 088 1620 or email us at [email protected].
We offer promise to offer you guidance and advice – whatever your procurement challenge.
