Procurement Navigates Persistent Global Economic Uncertainties

As 2023 year-end economic data has become newly available from different countries across the globe, it’s clear that there are significant differences in factors such as inflation rates, consumer spending, wage growth, and more. While the U.S. saw faster economic growth and better indicators on consumer spending last year, that is not the case for other pockets of the world – which ultimately affects multinational companies and their purchasing and supply chain operations.

On February 14, 2024, data revealed that the U.K. was in a technical recession after two consecutive quarters of a shrinking economy; the same is true for Japan, whose was weaker than expected, although employment conditions there provide optimism. Per reporting by the Wall Street Journal, China and other parts of continental Europe are also struggling with weak economic growth. France is no exception; the country’s Prime Minister recently announced a 10 billion Euro savings plan.

Even for companies whose own economic conditions and the markets in which they serve are improving, there most likely remains a clear top-down directive to stay focused on cost efficiency and maximizing return on existing resources and investments. Budgets remain tight and new initiatives remain under scrutiny.

Time to Feature Procurement’s Prowess

In late 2022, we published an ebook titled “Five Ways Spend Intelligence Helps You Fortify Against Economic Uncertainty.” For some, it feels analogous to the movie Groundhog Day. As we wrote back then:

In all of these and other times of supply chain and economic uncertainty, organizations often shift into protective mode – looking inward and reworking priorities as top-line revenue forecasts are downgraded. It’s common that the business will turn to Finance and Procurement for solutions to reduce bottom-line costs and supplier risk…. It can also be hard to innovate and transform your approaches when the pressure is on. Time is of the essence, yet results are required. How does your team deliver under these stressful circumstances?

This perhaps paradoxically presents a prime opportunity for Procurement: The team can provide the strong leadership needed to harness data, insights, and stakeholder collaboration to identify and secure new cost savings. Or, in the face of inevitable pricing inflation, they can step in to negotiate contract-driven value adds, minimize cost increases, and/or identify ways to reduce risks and increase quality in the supply base. 

To do that, Procurement needs the right solution to rise to the modern moment. Spend Intelligence that goes beyond traditional spend analytics gives a complete picture of what’s been happening across all your spend categories, lets you quickly spot new targets for focus, and empowers you to help stakeholders see the reality behind your recommendations.

At the same time, Procurement Performance Management creates the central hub where you can turn those spend insights into new procurement projects, track and direct progress on your initiatives, and make the outcomes, including your overall impact, impossible to miss.

High-ROI Solutions – Paid Back in Less than 6 Months

The ability to find and better execute on cost-saving measures is great, but how can you secure the investment when you’re supposed to cut spend? Understanding how to articulate the expected benefits and value, and how soon you can recoup them, is key to getting any kind of buy-in and commitment.

Hobson & Company, the leading independent ROI and total cost of ownership (TCO) research firm, recently studied more than 24 procurement leaders, exploring their experience with SpendHQ’s Spend Intelligence and PPM solutions. The goal was to better understand the areas of value the teams were able to capture and quantify them into simplified financial metrics.

The findings cemented the fact that Procurement can have its investment and pay it off too.

A representative company with $2B in spend and $1B in average addressable spend using Spend Intelligence could recoup its investment in five months and

• Achieve a 660% ROI over three years
• Nearly eliminate data handling (a nearly 80% reduction in time spent)
• Address 10%+ more spend for millions in increased cost savings

Likewise, the research found that a similar representative company using PPM could recoup its investment in only three months and:

• Secure an 814% ROI over three years
• Nearly eliminate ad-hoc reporting needs and requests
• Cement a collaborative relationship with Finance by halving reporting cycles
• Increase savings by 50% through streamlined collaboration

The Time-to-Value is Faster Than You Think

One of the leading issues with digital transformation is how lengthy implementation and onboarding cycles can push back value creation. However, there are ways to minimize implementation timelines.

Implementing Spend Intelligence, for example, relies on a combination of spend category expertise, a proven AI-driven approach to data handling, and customer knowledge to normalize and categorize nearly 97% of spend data. It takes the burden off of IT and internal solutions owners and allows everyone to start creating value faster.

Likewise, PPM and Spend Intelligence come with 40+ data and process integrations that give users access to supplier data, ESG ratings, and overall seamlessness as the solutions become part of existing procurement ecosystems instead of replacing them or creating disjointed processes. These integrations include:

• Darkbeam
• Supplier.io
• Coupa
• SAP Ariba
• Market Dojo
• EcoVadis

Conclusion

There’s certainly no question that economic uncertainty is worth paying attention to. But there’s also no question that it puts Procurement on the biggest stage, in the spotlight, and with opportunities for lasting impact.

Schedule a demo today to learn more about how our platforms can help you drive lasting impact, even in this year’s uncertain economy.