Ed Winterschladen

21 July 2020
Topics in this article
  • Cost Optimization
  • Supply Chain & Logistics

and the UK’s procurement & supply chain market

The business landscape in the UK is shifting at a pace most of us have never witnessed in our careers. So I thought it would be helpful and interesting to pull together some thoughts on how cost optimization and the UK’s procurement and supply chain market is changing and the trends we’re seeing based on our work and conversations with companies over the last month.

1. Decisions continue to be made at pace, and big changes are happening fast

We continue to see that decisions that would have taken months pre-COVID are now being made in days or weeks. It’s not just the pace of decision-making that’s changed – it’s also the scale. Transformative programs that previously would have been mapped out on a multi-year basis are now being driven through on timelines of a matter of months.

Ultimately, the existential challenges being faced by many businesses have put them in a situation where they need to be bold – no incremental change is no longer an option for many.

2. Cost reduction is being used to stem the need for job cuts

Cost optimization’ is probably the phrase I have heard used most in July by people in the sector. As we all know, companies are facing tough choices in relation to jobs, and many companies are looking at cost optimization programs as a way of delivering savings – ultimately so that they can protect as many jobs in their workforce as possible

Employees are often a business’s most valuable asset, so this is the right choice. We’ve found in our work at Proxima that cost optimization programs can typically cut supplier costs by between 8% and 15% – for many companies that can provide much-needed headroom to save the jobs of some employees.

3. The way demand is forecast is changing

Knowing when consumer demand will be high or low is key for companies and is what makes ‘just in time’ models work. However, COVID has changed the way consumers behave, and that means the data that typically powers forecasting models is now often wrong.

To give a very simple example, retail businesses often forecast lower demand in August as people go on holiday – but knowing how many people will go on holiday this year is an unknown and can change rapidly (as we saw with the quarantine rules introduced for Spain).

This means the previous data and models can only be a starting point. New insights need to be added to get close to accurately predicting consumer behavior as the UK emerges from lockdown.

4. Consumer choice is constricting

COVID has added a huge amount of risk and uncertainty to supply chains. The result of is that many companies are looking to make their supply chains simpler, and one of the ways we’ve seen businesses doing that is by reducing the number of products they are offering. Ultimately, the knock-on effect for consumers will be less choice.

5. Technology is in huge demand

Some of the biggest change programs that are being progressed at the moment are in the technology space, as companies upgrade old systems to cope with new challenges or bring in new tech systems from scratch.

We’ve gone from a point in May and June where IT contractors were having to search hard for work, to one where it’s now companies that have to work hard to find available contractors. That’s a problem that companies need to be aware of and consider how they work around.

Let’s talk.

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