Companies will once again have to look to their supply chain and their suppliers for greater cost benefits.
Yesterday, Productivity Spectator talked about the importance of developing relationships with customers and how important it can be to demonstrate the productivity benefits that your product or service can deliver.
This will be a far more effective marketing tool than engaging in promotional, branding efforts, given the unlikelihood of companies making major purchase decisions.
If you are one of a number a players in a supply chain, then now is the time to look at how well you integrate with other members in that group.
This is a trend which has already happened in the highly competitive and low margin office supply area. One of biggest supplier of pens, paper and other stationery to corporate Australia is Corporate Express - a subsidiary of the US giant Staples.
Corporate Express relies on a business model that leverages massive scale and buying power to keep costs low. Margins are razor thin. According to the CIO of Corporate Express, Garry Whatley, they have to become increasingly integrated along the supply chain, developing internet procurement dashboards for their customers and using that data to ensure that the myriad suppliers they use have an almost frictionless restocking process.
In the interview above, Whatley explains that the supply chain integration trend is accelerating and that where once people were looking to remove costs from certain components in the supply chain, now attention is being placed on how to remove transaction costs for everyone. His IT purchases are focused on ensuring that process is as streamlined as possible.
Firms that will win in this space are ones who have already undertaken this sometimes painful process and can then teach their customers how they can adapt it to their business.
If companies are going to be looking to cut costs then it will certainly be taking place in some areas of procurement. Talking to your partners in the supply chain might be an effective strategy to eliminate costs before taking a further hit to your margins.
PRODUCTIVITY SPECTATOR: Corporate Express smooths out the supply chain
The trend is towards supply chain integration, reducing transaction costs and other 'frictions' to ensure as streamlined an operation as possible.