How Procurement Can Help Manage Inflation's Impact on the Business

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Businesses and supply chains are struggling with multiple challenges at once. According to Deloitte, supply shortages, ongoing efforts to curb COVID-19, and Russia's invasion of Ukraine "are adding to business and consumer concerns that America’s inflation rate—now at a 40-year-high—will remain high well into 2022."

With inflation set to remain high, organizations are scrambling to find ways to manage its impact.

Here, we will explore how procurement and supply chain functions can play a role in enhancing resiliency as orchestrators between the business and its suppliers. By working together, these teams can help the company navigate these uncertain waters and maintain stability during these challenging times.

Corporate Resilience Today

Corporate resilience is the ability of an organization to withstand and rapidly recover from shocks. In today's business environment, it is more important than ever for companies to have a robust resilience strategy in place. With inflationary pressures mounting, businesses need to be prepared for disruptions to their supply chains, as well as fluctuating customer demand.

A company's procurement and supply chain functions are critical to its resilience strategy. Procurement is responsible for sourcing and managing supplier relationships, while supply chain leaders manage the flow of goods and materials. These functions work together to ensure that the company has the resources it needs to operate effectively.

When inflationary pressures disrupt the business environment, procurement and supply chain must be able to adapt quickly to maintain stability. To do this, they need to have a deep understanding of the company's supply base and be able to identify potential risks. They also need to be able to build strong relationships with suppliers and negotiate favorable terms.

Procurement's Role in Managing Inflation Shock

Inflation can cause several problems for businesses, including higher costs and lower profits. Left unchecked, inflation can even lead to downsizing and bankruptcy.

Thankfully, procurement can help companies manage inflation in several ways.

First, procurement can help companies negotiate better prices with suppliers. This is especially important for companies that purchase large quantities of goods or services.

Procurement can also help companies find new suppliers that can provide the same quality products or services at a lower cost. This is especially important when inflation is caused by supply shortages.

Procurement must then help the company hedge against inflation by entering long-term contracts with fixed prices. This can protect companies from rising prices and help them budget more accurately.

Finally, procurement can help companies manage inflation by working with other departments to find ways to reduce costs. For example, procurement can work with the marketing department to find cheaper advertising options or with the finance department to negotiate better interest rates on loans.

Navigating Uncharted Waters

Inflation is a challenge that all businesses face, and many businesses already have contingencies in place to address it. In this environment, however, organizations need new strategies to address a growing list of disruptions that are challenging their operations. Procurement is now a linchpin for corporate resilience strategies and must leverage as many resources as possible to protect the bottom line.

To learn more about how procurement can help companies navigate these trying times, don't miss the next ProcureCon Indirect East conference. It will occur from September 12th to 14th, 2022, at the Omni Orlando Resort at ChampionsGate in Florida.

Download the agenda today.