Why cutting costs in the short term can hurt your business in the long term


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As if the pandemic weren’t enough of a disruption, the price of most products is on the rise. It’s harder than ever to find suppliers who align with your budget limits, quality standards, and accountability goals.

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Cost reduction often comes first; a necessary business reality in uncertain times. Many business owners and decision makers are already cutting back on spending, especially when it comes to supplies. But with critical supply shortages and unpredictable fulfillment and delivery, the current pressure on the just-in-time supply chain model has made procurement a vulnerable – and expensive – part of business operations.

Cutting expenses while juggling multiple vendors, each promising lower prices than the last, may seem like the only option in the short term, but could lead to unnecessary complications in the long run. Business leaders must seize the opportunity to rethink their supplier strategy to promote sustainable cost optimization and rationalize purchasing.

Improve spend visibility

The first step to improving the supplier strategy is to gain visibility into the needs and purchasing habits of your teams. Without this information, your business may miss opportunities to streamline ordering, meet quantity limits, and guide employee purchases. Your goal throughout these conversations should be to better understand your team’s buying needs and behaviors – while having candid conversations about budgets, costs and timelines – so you can reorganize or establish policies. and workflows that empower your teams to make better buying decisions.

Focus on cost optimization

Cost optimization is often confused with cost reduction, but they have very different impacts on your business. Focusing narrowly on the latter can compromise product and service quality, squeeze already overworked teams, and impact team morale.

Instead, as you build and grow your procurement process, consider ways to maximize efficiency by eliminating waste and automating manual processes. Intelligent enterprise purchasing capabilities can help you save money and time on administrative processes and reinvest those resources in value-added initiatives that advance your overall mission.

Simplify with automation

When considering solutions, it is important to prioritize simplicity and a great user experience. Simplicity often enables compliance with internal policies: Amazon’s 2022 State of Shopping report found that 82% of business shoppers want the same shopping experience for work as when shopping for themselves at home. Business leaders should invest in smart shopping technology that can suggest products based on purchase history and what’s popular among your employees, offer flexible shipping options, provide intuitive user experiences and grow with your business, so you can focus on what matters most.

Diversify and Empower

The past few years have proven that the shopping landscape will never be the same. Diversity and inclusion initiatives are – rightly – playing a bigger role in many facets of business operations, including purchasing processes.

When reviewing your purchasing processes, consider putting your values ​​into action by implementing a diversity certifications policy to highlight and prioritize products sold by local and/or diverse merchants, as well as those that offer certified sustainable products. Recognized certification bodies include the Department of Veterans Affairs (VA), the National LGBT Chamber of Commerce (NGLCC), the National Minority Supplier Development Council (NMSDC), and many others.

As I speak with business leaders across the country, in organizations large and small, we find leaders struggling to find a balance between diversifying their supplier base; adhere to their environmental, social and governance objectives; and reduce costs. They are looking for a solution that can help them simplify their purchasing processes, reduce costs and automate repetitive tasks to save time and increase efficiency.

Cost-cutting and short-term thinking can often impair an organization’s agility, compromise performance, and affect strategic direction. Now is the time for business leaders to think beyond lowering prices as a single priority to broader changes that reduce expenses while delivering real long-term value to their organization.


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