A push for more cost-effective near-shoring, an increase in companies buying or investing in part of their supply chain, and more use of procurement to increase top-line sales are among the key trends for 2023, according to Spend Matters.
Near-shoring has been a consistent theme of 2022. However, there has been a growing appreciation that when done intelligently, buying local or at least regional can not only ensure greater reliability of supply, but also be more cost-effective, once shipping costs, trade tariffs and logistics are factored in.
Carefully selected local suppliers can often offer a higher speed of response businesses are looking for. In addition, they are often able to produce smaller batches, which is not viable for Asian suppliers due to the high logistics costs.
Near-shoring also doesn’t necessarily mean that companies source only in their home country. Often, it means sourcing and thinking in regional clusters; e.g., UK companies working with suppliers also in Eastern Europe or businesses based in Southern Europe purchasing supplies in Northern Africa. Regional clusters of this type can help companies achieve the ‘best of both worlds’ with closer partners, securing the supply chain while avoiding high costs.
As businesses seek to secure their supply chains in an uncertain global environment, we are beginning to see a reversal of the predominant trend of recent decades toward outsourcing. Some businesses are seeking to bring more processes and inputs in-house, including by acquiring key suppliers.
Alternatively, many businesses are now looking to co-invest with key suppliers in new production facilities nearer to their core markets. This investment often comes with exclusive supply rights and is an innovative way of reducing supply chain risk without taking on commercial activities outside of a company’s core expertise.
Procurement: from just the ‘bottom line’ to helping to move the ‘top line’
Traditionally seen as a ‘bottom line’ issue, helping businesses to improve margins, procurement is increasingly being seen as a ‘top line’ issue.
Decision makers are recognizing more and more that intelligent, cost-effective procurement can feed into pricing strategies, ultimately boosting sales and turnover. Reach the right price point and that can help drive sales volume. This strategy is especially relevant in an inflationary environment where price concerns are even more critical than usual.
Editors note: Article published by Spend Matters and authored by Mohamad Kaivan, Managing Director at INVERTO.