Inflation, high interest rates and rising business costs are just some of the outside factors that are driving companies to cut back right now. The same organizations are also dealing with a persistent labor shortage, high demand and increasing competition—all at a time when end consumers are more carefully budgeting their hard-earned dollars. The technology sector has been hit particularly hard by the cutbacks, but other industries are also feeling the pinch right now.
“Supply chain disruptions, rising global commodity and energy prices, volatility in major economies and underlying demographic factors have all contributed to rising prices,” global advisory Teneo states in its U.S. Economic Outlook 2023: A ‘Soft Landing’ or ‘Deep Recession.’ “To manage this, the Federal Reserve has reacted quickly, raising interest rates earlier and more aggressively than any other major economy.”
While there is cause to be optimistic about the national economy, Teneo says macroeconomic uncertainty—and the possibility that the economy could be about to enter a recession—is lurking in the background right now. The good news is that there are some steps that procurement professionals can take now to start “doing more with less” and to help their organizations successfully navigate the uncertainty.
As a starting point, consider expanding the sourcing channels and countries beyond local agents and distribution. “Expanding the sourcing channels and countries can increase buyers’ choice of suppliers and sourcing range, which can help buyers find more affordable and higher quality products,” says Freda King, a service representative with Win Source Electronics. “The fact that the ease of international shipping has provided enough to ensure shipping within two to five days gives buyers more opportunities to find better products from around the world.”
4 Steps to Take Now
In light of the current economic headwinds, buyers should also be wary of counterfeit components, which may become more prevalent in the electronics supply chain. One way to thwart the problem is by tightening up your supplier qualification processes. This will not only help reduce the risk of counterfeits, but it will also improve your chances of procuring quality products.
King also advises buyers not to rush to order materials that are not urgently needed in the near future. Instead, wait until the market stabilizes—something that’s predicted to happen in the second half of the year—before purchasing. Doing so can also effectively reduce your procurement costs and help your organization do more with less.
Here are four more steps that procurement professionals can take now to streamline their processes, improve their supplier relationships and save money:
- Establish close, cooperative relationships with your supply chain partners. Buyers should establish a good cooperative relationship with suppliers and establish a long-term cooperative partnership in order to obtain better prices and better services. In addition, actively participate in supply chain management to ensure stable supply and logistics.
- Look for ways to improve procurement efficiency. Optimize the procurement process, shorten the procurement cycle and improve procurement efficiency through automated procurement processes and the use of electronic procurement platforms. This saves time and labor costs while also helping to shorten supply cycles and reduce inventory costs. For example, Win Source provides a one-stop e-procurement platform, automated procurement processes and fast logistics, all of which help reduce labor costs and shorten the procurement cycle.
- Seek out more cost-effective products. Methods such as price comparison tools, centralized procurement, and unified and standardized procurement can help buyers find more cost-effective products and reduce procurement costs. “We provide cost-effective products, including original products with stable quality and verified alternatives,” says King. “We’ll also provide regular price adjustments and purchasing advice to ensure customers always get the best price.”
- Focus on market trends and suppliers’ operating conditions. Pay close attention to market trends and suppliers’ operating conditions, adjusting your procurement strategies in a timely manner. In addition, regularly conduct business negotiations with suppliers to obtain more favorable prices and services. Ask your suppliers for regular market trend updates and supply chain management advice, then use that information to make adjustments, avoid challenges and leverage new opportunities.
