Procurement execs told to fight increased costs

23 April 2008
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24 April 2008 | Jake Kanter

Chief procurement officers (CPOs) should renegotiate contracts with suppliers to mitigate the risk of inflation during economic uncertainty, according to experts in the US.

A panel of six procurement consultants urged CPOs to take five steps to gain greater control over spending in preparation for an economic downturn.

The group said getting ahead of inflation will be "critical" and buyers must renegotiate high-value, high-risk contracts for goods and services such as fuel and logistics. They also insisted purchasers should try to negotiate lower prices where possible, without it affecting the performance of suppliers.

Other tips included increasing spend visibility, enforcing contract compliance among suppliers and assessing the risks of low-cost country sourcing. Departments were also advised to become as efficient as possible, while firms squeeze budgets and head counts and more is expected of them.

Donavon Favre, professor of supply chain strategies at North Carolina State University, said these changes would pay off later. "The decisions companies make today will impact how they are operating in a year or two years' time. Those who get lean intelligently now will excel in the future."

The group was brought together by procurement software firm Emptoris to develop advice for purchasing leaders about how to get control of spending and cut costs.



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