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Keep Costs Down and Generate Value in the Age of the Unpredictable Consumer

Posted by Kelly Deacon on Feb 26, 2015 10:00:00 AM


Generate_value_in_the_age_of_unpredictable_consumersOne would think that with a 9.3% decline in gas prices and a buoyant labor market, consumer spending would be increasing and retailers would be reeling in the extra cash… but that’s not necessarily the case.

The reality? Retail spending fell 0.8% in January, leaving retailers to wonder what consumers are doing with the extra savings and why profit margins aren’t higher.

Instead, consumers are using the money they’re saving at the pump to pay off debt and boost personal savings. In fact, according to The Wall Street Journal, the personal saving rate jumped from 4.3 to 4.9% in December.  

It’s going to be a while before savings from gas prices start to trickle into the U.S. economy – but it will happen eventually. Assuming gas prices remain low, 55% of consumers surveyed expect to spend more in discretionary categories over the next six months. While this increase will likely impact retail positively, especially in home goods, apparel, accessories and electronics, restaurants and grocers are unlikely to gain spending share over this period.

Welcome to the age of the unpredictable consumer -- where spending habits are highly variable, and make it difficult for businesses to accurately project how they will fare. This places the onus directly on procurement and sourcing teams to protect financial performance. Here are a few strategies to keep in mind for keeping costs down and generating value despite the tumultuous times.

Find the Best Value Possible

To keep costs down, it’s important to source strategically and get the best price and value on the materials you need, so when the situation warrants it, you can allocate the savings elsewhere. This process may sound easy -- do your homework on each supplier, understand what product options are available and choose the right suppliers to make it happen – but it takes time. E-sourcing can make this process simpler and more effective, showing you exactly what products, prices, and contract terms are available and helping identify the best supplier for your sourcing needs.

E-sourcing also helps organizations build a larger base of suppliers – which is essential for thriving in an unpredictable landscape. The more trusted suppliers a company has, the more flexibility they will have to respond to changes in the market.

Having a larger supply base also provides backup sources of supply so you can easily and confidently pull the trigger on a new order and avoid losing precious sales in the event of a supply chain disruption.

Know the Market

Proactively monitoring costs and conducting thorough market analysis fuels confident and informed decisions, even when consumer behavior is unpredictable or the economy is in a flux.

Don’t be at the mercy of your suppliers for information on prices and fluctuations – inform yourself.  Understanding current market conditions and commodity pricing will not only give you a leg up on predicting your customers’ next move, but it will also help you decipher the best times to run your sourcing events so you get the best price under the most desirable terms.

Align with Key Internal StakeholdersNew Call-to-action

As the market evolves, so must your sourcing objectives. When was the last time you connected with the market research team to understand what’s most important to consumers, or how customers view your brand externally? Similarly, it’s also important to connect with the PR and marketing teams to ensure that any sustainability and quality wins driven through procurement reach potential customers.

Focus on What Matters Most

Use tools and partnerships to your advantage. Moving sourcing activities online streamlines the entire procurement process, saving you both time and money.

E-sourcing will free you and your teams to focus on strategic initiatives that will benefit your long-term financial goals – such as ensuring your product meets the needs of today’s consumers, or that the company is offering the right blend of quality, price and sustainability, for instance. And when you partner with an outside team – like Intesource—you’ll have even more time to get creative and focus on the urgent opportunities and challenges facing your organization.

What are your strategies for reducing costs and generating value? How are you using e-sourcing effectively?

For more strategies, check out our latest report to discover how to Boost Your Company's Valuation with eAuctions.


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Topics: Strategic Sourcing In The News, About e-Sourcing