08 December 2021
Topics in this article
  • Cost Optimization
  • Supply Chain & Logistics

There is no end in sight to the inflationary price pressures U.S. businesses have been facing throughout 2021. The culmination of higher wages, shortages of materials, and supply chain disruptions continue to create both challenges and opportunities.

Moving into 2022, procurement professionals find themselves in the spotlight once again and will be asked to do more with less as they play a key role in driving organizational change and delivering value to the bottom line.

Given these challenges, we wanted to outline the key areas all procurement professionals should be thinking about as they get their cost base ready for 2022.

Foundational principles

When it comes to getting your cost base into the best shape it can be, you must first build on solid foundations. Establishing the following principles is priority number one.

  • Know your data – The journey to a single source of the truth can be both long and perilous for many organizations as multiple data sources add complexity. Procurement is uniquely positioned to bring structure and clarity, with vast supplier expertise and a data-driven toolset to unlock key insights and savings.
  • Understand the business roadmap – Procurement is a business enabler and must be fully aligned to and supportive of project priorities. Sourcing teams provide the most value when dialled into the planning and budgeting cycles and move from a reactive, to a proactive method of engagement and internal customer focus.
  • Establish and build on key relationships with business leaders – In larger organizations it can be challenging for Procurement to maintain a connection with business leadership and avoid operational silos. In 2022, procurement professionals must challenge themselves to take business engagement to the next level, shape projects with key decision makers and be confident in the insights and value they can bring to the table.
  • Build a culture of cost consciousness – Changing behaviors across a business is often the most challenging for any leader and is certainly no different in procurement. Teams cannot underestimate the shift in mindset needed throughout the business to instil a culture of cost consciousness to all budgeting and spending decisions.

Actionable plans

So how can procurement teams turn talk into action in 2022 and deliver for their business? It is vital to get the right actionable plan in place, build on the above foundations and deliver essential value as companies continue to bounce back from the pandemic. These plans should include:

  • Cost transformation considerations. How you’ve always done it in the past, doesn’t necessarily make it right, or maximize opportunities for the future. Shaping and influencing business priorities while leveraging market innovation from the supplier network are critical activities that Procurement must continue to lead.
  • The timeline for expiring deals that will form the backbone of 2022 planning. This foresight may seem obvious but is not always as clear as it should be. Procurement can be on the front foot with business engagement and ensure the right category knowledge and capability is ready to be deployed at the right time.
  • Commercial management as part of a tiered Supplier Relationship Management program. Regularly testing incumbent providers in the market is essential, together with auditing key contracts against evolving business requirements. Suppliers play an increasing role in innovation, growth, and productivity – as well as a potential source of risk. Emphasis on supplier management needs to align with the significant impact supply partners can have on the business.

A final consideration

2022 will undoubtedly be another challenging year for business as we get to grips with rising inflation as Procurement is asked to do more with limited investment. The starting point for success is early business engagement, as we try and leave the warm glow of our spreadsheets and spend more time with our customers and key decision-makers.

An important consideration ahead of these conversations, particularly when the perennial cost savings are on the agenda, is understanding how savings are factored into budgeting. This needs to be clear so that the right strategy can be agreed upon to best control the cost base. For example, are budgets already assuming a certain percentage of savings, or are savings siphoned off from budgets or reinvested? The answers to these questions will have a significant bearing on the approach to business engagement and could hinder collaboration if they are not considered carefully.

Next year is almost upon us and it is an exciting time for our profession to bring a sizeable armoury of knowledge and skills to the ambitions of our businesses, and the costs we manage passionately.

Let’s talk.

If you are looking to drive purposeful and profitable change, get in touch.

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