How purchasing managers, commodity managers , sourcing leaders are taking actions related to inflation and continued uncertainty.
Inflation is one of the important problem of all procurement professionals minds right now. US Inflation Rate is at 8.52%, compared to 9.06% last month and 5.37% last year. This is higher than the long term average of 3.26%. Euro area annual consumer inflation jumped to a new record high of 9.1% in August, according to a flash estimate from the EU’s statistical office on Wednesday. The figure was up from 8.9% in July, Eurostat data showed.
Inflation has forced purchasing managers, commodity managers , sourcing leaders to take action, What are these actions?
1.Finding new suppliers to lower costs
2. Establish price change mechanisms.
3.Renegotiating contracts with existing suppliers
4. Understand your major cost drivers like Direct material · Direct labour · Manufacturing overhead · General selling & administrative · Profit
Fighting against rising inflation is not an easy job. However, by creating risk management strategies and strong supplier relationships in place, procurement managers can minimize high Inflation rate risks.
Agile methodology is a project management technique born out of software development.
Agile procurement is an altenative tool in the procurement toolbox, to be utilised for the right projects at the right time.
Agile sourcing is using of agile principles to make sourcing processes faster and more effective.
Traditional procurement works on classical rules. Most of the time,decisions are not fast and is taking time.
Traditional procurement involves fixed deliverables, extensive documentation and a comprehensive project plan.
In an agile approach, you need to have frequent communication and collaboration during the supplier selection process.
Step 1 : Build a cross functional team involving all people that have impact in the vendor selection process, and those who will have to work day to day with the future team.
Step 2: Establish common goals and inform pre-selected vendors related to new selection process.Send out the presentation agenda and guidelines in advance.
Step 3: Run the selection workshop . All vendors came with the commercial and technical team that would actually work with you and required people that could build a proposal and decide on prices.
Step 4 : At the conclusion of the presentations and after your review, present the selected supplier. The decision was taken and announced to all vendors at the end of workshop. Contract is drafted, negotiated and signed.