Which procurement strategies to face inflation

In an increasingly uncertain economic context, the procurement department has become a key player in managing companies’ costs. Sourcing strategy is one of the most important tools for maintaining profitability, by finding the most competitive suppliers in terms of price, quality and delivery times. However, with the return of inflation, procurement directors must rethink their strategy to face these new economic challenges. In this article, we look at the impact of inflation on the procurement department and explore the sourcing strategies that can help companies stay profitable despite today’s economic challenges.

What is inflation?

Inflation is a general and persistent increase in the price level of an economy. It is often measured by the consumer price index (CPI), which measures the change in the prices of a basket of goods and services commonly bought by households.

Inflation can be caused by different factors, including demand exceeding supply, rising production costs, rising raw material and transport costs, and expansionary monetary policies pursued by governments.

Inflation can have a significant impact on a company’s purchasing strategies. Here are some strategies you can adopt to deal with inflation:

- Negotiate with suppliers: ask your suppliers whether they can offer you discounts or fixed prices for a set period. If you have good relationships with your suppliers, they may be willing to work with you to find mutually beneficial solutions.

- Optimise production costs: assess production costs to identify areas where you can cut costs without compromising quality. You can consider automating some processes or adopting more efficient practices to reduce labour costs.

- Avoid impulse purchases: avoid impulse or non-essential purchases that can worsen the impact of inflation on your business. Focus on the products or services that are essential to your business.

- Diversify your sources of supply: avoid relying on a single supplier for your purchases. Diversify your sources of supply to reduce your exposure to price fluctuations.

- Review prices regularly: regularly monitor the prices of the products and services you need and adjust your purchasing strategies accordingly. Keep an eye on market trends and price changes.

By applying these strategies, you can help minimise the impact of inflation on your purchasing and on your business as a whole.

Abdelilah EL ATTARI

Expert in digital transformation and Artificial Intelligence (AI): Procurement digitalisation (S2C, P2P), HRIS, Civic Tech and participatory democracy, Marketing and customer relations