Cost-Cutting Opportunities to Overcome Procurement Woes in 2023

Technology boom and sustainability goals remain top of priorities lists this year in the supply chain. For procurement, these trends are steady, but an increased awareness on costs amidst inflation woes from 2022 shape how these trends culminate.

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Technology boom and sustainability goals remain top of priorities lists this year in the supply chain. For procurement, these trends are steady, but an increased awareness on costs amidst inflation woes from 2022 shape how these trends culminate and the impacts they make. Melissa Twiningdavis, senior managing director of supply chain operations at Accenture, explains that "we have yet to see the full impact of the issues that arose in 2022 and I suspect we will start to see more cracks in the supply chain this year. While companies can’t prevent these challenges, using automation at scale can make a company’s operations more resilient". 

Automation works with employees to problem solve and fuel digitization

Automation has the ability to compound upon procurement tools and free up employees to take on more complexities, which cuts costs and boosts productivity. According to recent research by Accenture, companies that thoughtfully and strategically automated systems saw up to a 2.8x growth in profitability and 1.7x increase in efficiency, 42% faster process innovation and 1.3% higher operating margins. Cost optimization can help companies move faster with more efficiency, says Twiningdavis, to eliminate redundancies and implement automation that accomplishes routine tasks. Things like AI chat bots or warehouse robotics make space for employees to take on larger projects and problem solve to improve procurement strategy. Taking advantage of these technologies also unlocks further efforts to digitize processes, which again can have cost saving benefits, that streamline and create solutions before issues even arise. 

"Many digital transformation initiatives will find this is the year the “rubber meets the road” – and promises of future value will no longer suffice. The digital transformation spigot will turn off unless teams can justify technology investments, ROI and TCO through a careful business analysis," says Lalitha Rajagopalan, co-founder and head of product strategy and marketing at ORO Labs. "Smart tech leaders will focus on the last mile digital tools that bridge these delivery gaps, extending automation, accelerating user adoption and unifying business workflows. Many will concentrate on leveraging recent digital transformation investments for things like ERP, CRM and workplace productivity tools – areas that will enable them to drive and maximize value."  Investing in these areas to better workflows has shown to be important in recent years — now it's imperative. Rajagopalan explains that this influences data, and that data is key to creating visibility, which ultimately affects decision making. 

Sustainability investments are a necessity

Making those decisions to bring more sustainable practices and ethical sourcing forward, companies need to make visibility a high priority and budget for the technology and resource to make that a reality. As eyes have shifted to make a more ethical market, Twiningdavis says "utilizing the right procurement systems can support a company’s goals by identifying suppliers that are committed to sustainable practices".

ESG has also been heightened due to U.S. regulations like Uyghur Forced Labor Prevention Act (UFLPA) that seeks to keep forced labor goods out of the country. Eric Linxwiler, sr. vice president of retail solutions at TradeBeyond, says "ESG continues to be top of mind for supply chain managers, who are evolving their workflows in order to incorporate sustainable procurement practices. We expect this trend will only accelerate in the coming years, as responsible sourcing becomes an even more critical priority and as due diligence laws being passed around the globe spur companies to more closely scrutinize the social sustainability of their supply chains and weed out ethical abuses". 

In the age before the pandemic, supply chain disruptions could be seen a mile away, measured by statistics, mostly expected based on the time of year and economic status. Today, disruptions are around every turn and pop up without warning as everything from geopolitical strife to the economic rollercoaster, remains uncertain and adjustments in your supply chain have to be ready to respond. "Supply chain disruption, coupled with economic uncertainty, is driving procurement leaders to double down on their efforts to build strong supplier relationships that promote business agility. Companies are starting to realize that they must invest in getting to know their supply base better and make sure they have visibility and deeper collaboration and engagement with suppliers so they can improve supply chain planning and activity," says Rajagopalan, and this commitment to collaboration with people and technology has the potential to strengthen and strategize your procurement process that saves both time and money.