Author picture

Carl Guarino

Entering 2009, we will see continued reversal of the inflationary headwinds that have driven commodity prices higher in the past few years. This opens new opportunities for cost savings and reinforces the value of leveraging procurement best practices for long-term benefit. Companies capitalizing on these opportunities will drive millions in near-term cost reductions and lay a foundation for long-term cost savings.

To drive game-changing impact, executives will aggressively pursue new strategies and new sources for cost savings. We expect companies to re-examine and reset their demand levels, spending policies and service level agreements, as well as specifications for supplied goods and services. In addition, leaders will focus on capturing savings presented by deflation and earnings adversity. For example, ocean transportation rates, which rose heavily from 2006 to 2008, are subsiding because of reduced global demand and fuel costs, presenting near-term savings opportunities. Leaders also will use current economic concerns to evaluate cost-reduction opportunities that have been historically off limits, such as rigorous sourcing of leases, highly specialized equipment, vessel crewing and nonrecurring transport of materials.

More than ever, companies should seek out strategic opportunities to position themselves for future competitive advantage. We expect companies to put even greater emphasis on creating value from within their network of strategic suppliers. Executives will explore opportunities to extend the value of these relationships by driving deeper and broader efforts to variablize and outsource noncore business processes, such as customs clearance, warehousing, transportation and logistics management.

To implement these new supplier platforms, leaders will leverage outside resources to gain access to industry benchmarks, category expertise and additional capabilities. Over the next year, companies able to take advantage of the opportunities presented in this economy will drive meaningful savings that can be used to fund innovation and create sustainable competitive advantage.