Procurement departments play a critical role in managing inflationary pressures.
To cope with the new challenges, they can adopt fresh approaches and innovative thinking, CPO rising suggests in five strategies to overcome inflation:
- Improve Category Management: Understand each category’s needs to negotiate better pricing and terms, build stronger relationships with suppliers, and create a more reliable supply chain.
- Strict demand management: Involves balancing the supply of goods and services with customer demand. This requires companies to have a good understanding of the demand for their products and services, enabling them to adjust their production and distribution plans to minimize costs and mitigate inflationary pressures.
- Inventory management: Inventory management reduces costs by optimizing inventory levels and minimizing waste through adjusting batch sizes and order frequency, thereby reducing the need for price increases due to inflation.
- Defend Existing Contract Pricing: Protect existing contracts with suppliers, customers, and stakeholders to maintain stable pricing and reduce the effects of inflation.
- Maximize Low-Price Contracts and Build Inventory: Secure supplies at a lower cost and reduce the impact of inflation by taking advantage of low-price contracts and building inventory.