Skyrocketing inflation is the latest, and potentially greatest, challenge facing procurement professionals, according to a recent survey from Toronto-based procurement software company TealBook.
The company surveyed 200 sourcing and procurement executives at companies with revenues of $200 million or more about their supply chain concerns and found that all of them are taking big steps to thwart inflation pressures—including finding new suppliers, renegotiating contracts, and diversifying their supplier base.
The rate of inflation slowed in July, but still remained near record highs, at 8.5%.
Nearly half of those surveyed said they are actively searching for new suppliers to lower costs associated with inflation; 44% said they are renegotiating contracts with existing suppliers; and 40% said they are entering into pre-defined agreements for products that have high pricing volatility. When it comes to diversifying their supplier base, 46% of respondents said their companies are already benefiting from efforts to cast a wider net, while 99% said they want to increase those efforts as a way to deal with future supply chain problems. Supplier diversification includes efforts to meet environmental, social, and governance (ESG) as well as diversity, equity, and inclusion (DEI) goals, and expanding a company’s geographic sourcing reach, according to TealBook.
What’s more, 94% of procurement and sourcing executives surveyed said they are making visibility into second-tier suppliers a high or moderate priority as a way to find those new and potentially lower cost sources.
Despite taking those steps, more than three quarters of respondents said they remain concerned about their company’s ability to handle supply chain disruptions–primarily because their company’s supplier intelligence has not improved since the start of the pandemic, “making it even more difficult to pivot quickly if needed due to inflation pressures,” according to the survey’s authors, who said better access to procurement data would help alleviate that problem.
“With the onslaught and continuation of threats to the supply chain, even the most agile companies are not immune to supply chain disruptions and the negative impact of sky-high inflation,” TealBook CEO Stephany Lapierre said in a press release announcing the findings. “Access to the data needed to work with suppliers that can help mitigate inflationary and supply chain challenges gives companies the ability and agility to ensure the goods they need to run their business arrive on time and on—or under—budget.”