Strategies for CPOs to Navigate Times of Inflation


According to the J.P. Morgan research, inflation for 2024 will likely remain around 3% [1]. The economic winds are shifting, and inflation is on the rise. This presents a significant challenge for CPOs across all industries. They are facing procurement challenges with rising raw materials, transportation, and labor costs. However, amidst the turmoil lies opportunity. CPOs need strategic approaches to mitigate inflation and come out stronger for future challenges.

Understanding the Current Scenario

Before diving into strategies, it’s crucial to acknowledge the current scenario. Global events and supply chain disruptions due to the Panama Canal [2] and the Suez Canal [3] continue to fuel inflation. Geopolitical tensions across these crucial trade corridors force many companies to redraw decade-old trade maps. They are impacting MRO supplies and driving up procurement costs. This volatility makes accurate forecasting and cost management more critical than ever.

Building a Fortified Supply Chain

Optimizing eProcurement Process 

Streamlining the eProcurement process helps in informed decision-making. For instance, a company can use EDI and procurement software powered by supply chain analytics to fetch real-time data for price trends, supplier performance, and contract terms. This transparency can help the company to identify cost-saving opportunities and negotiate more effectively.

Diversifying Your Vendor Base 

As per the Deloitte report, organizations with regional supplier diversification are less likely to be impacted by disruptions. Reliance on a single supplier can induce a price monopoly. Instead, having a wide vendor network with regional diversification will foster competition and reduce costs. For instance, GM has announced a deal with Livent and LG Chem to buy lithium and cathode to mitigate the risk of building 1 million EV cars by 2025 [4].

Mastering Inventory Management 

Excess inventory ties up capital and increases vulnerability to price fluctuations. Implement lean inventory management practices like Just-in-Time (JIT) delivery and Kanban systems. For instance, big brands like Walmart and Target optimize inventory levels for specific items as per demand forecasting to minimize holding costs and ensure a steady cash flow throughout the year.

Collaborating with Suppliers 

Nearly 56% [5] of procurement teams use technology to foster strong, collaborative relationships with their suppliers. However, as per the PwC’s survey [6], more than technology, it’s about the company’s ability to adapt and change with the situation. Consider collaborative planning, forecasting, and replenishment (CPFR) to optimize your and your supplier’s operations.

Optimizing MRO Supply 

According to DXP head, digitization is the key to successful supply chain management. It starts with data and is enhanced with procurement analytics. For instance, this method of MRO optimization in the cotton industry can help the company quickly identify supply chain bottlenecks to minimize procurement error, minimize waste, and improve cotton production rate across the board. Learn more about how Moglix helped an EPC firm bring agility to the supply chain in this detailed case study

Bottom Line

By diligently implementing these strategies, CPOs can transform challenges into opportunities. Once you learn how to hold steady in an inflation storm, you can easily safeguard your organization’s bottom line and build a more resilient and adaptable supply chain for the future.

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