David explores the differences between cost savings and protection in our latest article
As global markets continue to flux with the impact of falling inflation, falling energy costs, improving supply chain resilience and assurance within supply; the question that we should be asking is:
Can Procurement discern when the approach should pivot from Cost Savings to Cost Protection/Prevention ?
Over the last 2-3 years Procurement has needed to be prominent in driving cost savings, reducing unnecessary expenses, policing contracts/rebate clauses and optimising efficiencies and ensuring product/services availability. In a tough and uncertain economic environment, these elements of the value that procurement delivers can sometimes feel counter-intuitive to building long-term, sustainable business relationships – however, they are the cornerstone upon which the business foundations are often built.
Procurement offers significantly more value than just delivering cost savings and understanding the market dynamics, global economy shifts, supply and demand patterns etc. A key element of the modern Procurement function is demonstrating commercial acumen and being able to pivot/change direction to keep ahead of the markets. The ability to discern the right time for the shift in focus is, typically, only gained through experience.
Alternatively, another school of thought is, both Cost Savings and Cost Protection/Prevention could and should be executed concurrently not just when the global economic environment is in flux. The nuances around how Cost Protection/Prevention is recognised can also create internal angst – which again emphasises the stakeholder engagement skills required by procurement to navigate complexity.
In my 20+ years’ experience of networking with Senior Procurement and Supply Chain Leaders internationally, there is definitely an overlap of skills but there are additional skills required as well. The ability to build, nurture and develop sustainable and mutually profitable relationships, no matter what the underlying Procurement agenda, can be tricky to find. One way to execute the shift in focus is engaging an external Interim who provides an objective and impartial perspective.
In summary, the above conundrum emphasises how complex the “modern” procurement role is and how agile, commercially astute and pro-active Procurement Leaders need to be to drive continuous improvement. On that basis, is it now time to move from delivering Cost Savings to driving Cost Protection/Prevention?
Find more articles on our insights page
