Businesses have an edge on supply chains

Businesses need to get into an express mode on savings. This is already the best time to unleash bargains. Never in the past have such circumstances prevailed where amazing deals are the new normal.

These opportunities are in abundance across most products and services, barring a few essentials that are demand-driven. I want to emphasize this is not about opportunistic pricing methods, but a genuine need to cut costs to align with businesses’ capacity to spend.

But those with significant exposures to supply chain costs on either the raw material or finished product are still seeking some leverage. The procurement departments have to zero in on quick wins while preparing them for the long run. With subdued commodity prices, falling freight charges, stable labour costs, and factories running on less capacity, there is ample room for negotiations.

But one has to put on a more comprehensive strategy to map the approach. Market intelligence must be harnessed along with more robust sourcing, especially by those who can still tap into sufficient demand.

Get cracking on change

It is time to recalibrate traditional approaches of sourcing. Procurement has long been waiting for a transformation. Supply chain teams have to decimate all conventional approaches. Technology, process optimization, out-of-the-box strategies, and tactical alliances are necessary to set the tone.

Partnerships in the supply chain will depend on the quantum of business and the ability to zero in on an intrinsic price that is in line with business fundamentals. Sourcing will require comprehensive research on suppliers’ data, BOQ (bill of quantities) alignments, and product specs most suited to business needs. It will have to identify goods and services that are fit for immediate use rather than stuck in supply chain nitty-gritty. For instance, sourcing needs to neutralize hoarders.

Nailing it

However, negotiation skills will eventually be the critical differentiator in pursuit of the best bargain. The two most essential ingredients is the ability to demonstrate scale and benchmarking to guide the posturing. In the current scenario, business resilience needs are pushing suppliers to seek a certain minimum uptake, as well cutting out mediators.

It is indeed the time for sourcing teams to forge alliances to garner the best bargains. For success of all three critical elements of a procurement strategy, it eventually will be the sourcing team that shall be the key driver. Armed with a comprehensive strategy and in-depth sourcing data with relevant product knowledge and pricing benchmarks, they can demand the best bargains.

All credible sources are pointing to supply chain realignments and tremendous untapped savings potential that businesses can exploit. In this pursuit, tactical buying is emerging as the ultimate tool of supply chain savings. Those businesses with adequate preparedness can significantly benefit in a sustainable manner, and not just on the deal-making.

Above all, with the top-line and bottom-line both impacted, there should be no hesitation in seeking reciprocity from the supply chain.

- Tariq Chauhan is Group CEO at EFS Facilities Services Group.