Limiting supply chain risk and managing costs in the face of inflation

The geopolitical context continues to have a major impact on global supply chains and, consequently, on the activities of companies of all sizes. Supply chain management and spend control are essential not only to maintain competitiveness, but to actually survive.

There are various methods and tools to help organisations limit supply chain risk, and make costs more manageable.

Diversify sources of supply
Companies now HAVE to adapt and rethink their purchasing policy accordingly in order to maintain and increase their margins. One of the most effective options is to act on strategic purchases by exploring new suppliers. By identifying new suppliers, particularly closer in location, has multiple benefits. It enables you to ensure that there is a constant supply of goods as you are not reliant on one source. It also means you can negotiate more competitive pricing and, if using a local supplier, you are not as affected by international situations. Additionally, working with local suppliers supports CSR policies by favouring short circuits and local products.

Diversification of supply sources is an excellent way for companies to limit the risks associated with shortages and to protect themselves against possible cost increases due to inflation.

Centralise purchasing
In order to limit the impact of inflation, companies should also, where possible, centralise purchasing. Doing so will give you more control over what is being spent, and with whom. This not only ensures that you are getting the best, negotiated prices across your organisation, but also increases your spend under management. This also vastly improves supplier relationships as they are dealing with one central function, rather than spread across an organisation.

Control indirect purchases
Controlling purchases of all types is vital, but indirect purchasing is often overlooked. Outside the constraints of the purchases usually made by a company, controlling this type of expenditure is often difficult, but just as important as controlling your direct spend. Controlling and reducing these costs can be a real cash flow opportunity.

Thankfully, there are tools to help you manage contracts in order to secure supplies over a given period and also anticipate possible increases. These tools also help you manage supplier relationships, identify potential risks, and monitor supplier performance. The key however is that such tools ensure that employees are able to easily find and buy what they need, at agreed prices, from approved suppliers. Employees are kept informed of the contracts signed with suppliers, reducing the possibility of maverick buying.

More than ever, purchasing plays a key role in the financial health of their company by guaranteeing supply, even in times of crisis.

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