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While businesses face challenges in the current economic environment, these extraordinary times also present opportunities that companies can exploit to gain competitive advantage.
Procurement plays a prominent role in seizing these opportunities, moving beyond the function’s traditional boundaries and helping to shape an organization’s strategic approach to become a high-performance business.
We are in extraordinary, if not unprecedented times. In industry after industry, businesses are bleeding red ink, laying off employees, being nationalized or simply going under.
While businesses face challenges in the current economic environment, these extraordinary times also present opportunities that companies can exploit to gain competitive advantage. Previous downturns have proven that companies may be best positioned to gain competitive advantage during and immediately after a recession.
Present conditions offer an ideal opportunity for an invigorated focus on costs. Consolidation, currency swings and the credit crisis are rewriting the procurement paradigm.
Findings from a recent online survey by Accenture reveals that a new business environment is emerging with significant opportunities for companies. Procurement leaders are playing a prominent role in seizing these opportunities, moving beyond the function’s traditional boundaries and helping to shape their business’ strategic options on their journey to becoming high-performance businesses.
The turbulent current economic times are impacting procurement in several ways:
Short-term responses to the downturn include cash conservation, cost reduction, supplier collaboration and relationship management. Many are re-evaluating or redefining their sourcing strategies and/or increasing their payment terms. Interestingly, longer-term initiatives have largely been left untouched as procurement transformation programs continue with little response to the present volatility.
Short-term actions are focused on survival and the day-to-day necessity of dealing with the downturn, but that does not suffice for companies in search of high performance.
To capitalize on opportunities, different organizations will need to respond in different ways. Before turning to the procurement function’s specific role in this, it’s necessary to first consider the context of the organization in which it operates, reviewing how recession-driven “big picture” strategic imperatives might affect the business.
Some possible strategies include redesigning the businesses operating model, making selective acquisitions and adopting green principles. Regardless of the strategy chosen, it is important that companies have a clear plan to execute on that strategy and also realize the role of procurement in delivering the financial and operational resources to fund that plan.
Accenture’s extensive research into high performance as it applies to procurement finds that procurement masters:
To successfully manage through these turbulent times, organizations need to drive structural improvements that can benefit them now and over the longer term. Procurement is at the forefront of this change—and the present economy marks an unrivaled opportunity for the procurement function to become an integral part of an organization’s ability to successfully mitigate these extraordinary times and ultimately achieve high performance.
January 12, 2009
Outlook from Accenture
Outlook is a journal of high-performance business.
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