The pandemic disrupted supply chains, leading to delays and goods shortages. Inflation has pushed prices higher, resulting in a value-driven shift in consumer behaviour, increasing the challenge for retailers to maintain profit margins. Geopolitical tensions have exposed vulnerabilities in global operating models, and as a result, navigating today’s uncertain and ever-changing operating environment has become the new normal.
This has forced retailers to rethink their approach to procurement and strategies to build resilience, maintain profitability, and remain competitive. As a result, many procurement functions are expanding their remits from a tactical role to a strategic function that drives value and sustainability.
Drawing on our hands-on experience co-leading client procurement teams, here’s where we’re seeing retailers focus their procurement efforts to deliver spend transparency, develop strategic vendor partnerships, improve service levels, and cut costs to drive success in today’s challenging economic landscape.
Market trends
Procurement often operates behind the scenes until economic pressures and sales decline demand greater cost management. But when it does gain focus, it can reveal significant opportunities for service improvement and spend transparency, while also delivering cost efficiencies.
Currently, many retailers face challenges with vendor management, leading to vendors left unchecked, expired contracts defaulting to rollover agreements, poor reporting, lack of invoice matching and visibility, uncompetitive rates and sub-optimal service levels. The absence of contract management systems and reliance on manual storage and data management make it difficult for procurement teams to locate contracts and assess the organisation’s contractual health. As a result, tracking details like expired contracts, upcoming renewals, variations in terms, and associated risks become a time-consuming challenge.
These visibility challenges keep procurement teams from making data-driven decisions, prioritising key vendors, and effectively allocating resources. It limits their ability to capitalise on vendor opportunities and streamline consolidation efforts. In addition, gaps in the analytical capabilities within procurement teams hinder the ability to identify and move forward on the most commercial and strategic priorities for the business. Training and development of procurement team to generate data-driven insights and make informed decisions is an essential step forward.
Managing large volumes of vendors – often due to split location and state-based agreements, or multiple vendors providing similar services – adds complexity to relationship management and fragments the value chain, often resulting in higher rates that don’t reflect the organisation’s buying power. By consolidating volumes with select suppliers, retailers could improve rates by 15 to 20 per cent, maximising both efficiency in ways of working, improved transparency, opportunities for integration of plans and invoicing, and cost savings.
Strategic procurement solutions
In today's competitive landscape, several AI-driven solutions offer advanced functionality, such as Coupa, SAP Ariba and Oracle Procurement Cloud. While powerful, these platforms are often costly and time-intensive to implement – a significant barrier for cost-conscious companies needing quick results.
To address these challenges, retailers can employ several immediate strategies to streamline procurement and cost control. Key steps include conducting a spend analysis to gain insights into functional and supplier costs, using a vendor spend matrix to identify strategic suppliers and address service issues, and strengthening under-resourced teams to fulfil business needs. Additional steps like delivering strategic Requests For Proposals (RFPs) and cost out, improving Service Level Agreements (SLAs), and clarifying spend data and invoicing processes are also effective measures.
Embedding environmental, social and governance (ESG) principles in procurement is also essential, as regulatory requirements now drive compliance around modern slavery, data security, reconciliation action plans, and illegal logging. Incorporating these elements in both templates and processes ensures ESG is at the forefront of procurement decision making.
A robust procurement process enables business teams to strategically assess and agree to reset requirements from suppliers. As markets, customers and business needs evolve, business scope requirements, SLAs, and contract terms should be reassessed to ensure they remain relevant and cost-effective.
By overlaying these strategies with a clear view of contractual health, including contract expiry and key terms, companies can develop a strategic approach to contractual and cost management health, ultimately strengthening procurement and achieving greater resilience.
Where to next?
Procurement must evolve to not only weather current crises, but to seize opportunities that secure competitive advantage and drive long-term profitability.
Procurement teams can enhance efficiency by optimising their contract management processes and leveraging data to deliver better rates and improved service levels. By adopting a strategic approach to procurement, supported by technology and skilled professionals, you can navigate today’s complex value chains with confidence and achieve long-term cost control.
We’re here to help
Reach out to our team of experts to explore how we can help you improve visibility of your procurement KPIs, contractual health, spend transparency, strengthen your procurement practices. Together, we’ll ensure your operations and spend management remain robust and adaptable to future challenges.
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