Prepare for an economic downturn: 4 steps to take right now

By Jeff Laborde, CFO, JAGGAER
As US business leaders prepare for a declining economic environment, Jeff Laborde, CFO at JAGGAER outlines four ways firms can leverage automation and AI

The U.S. is tracking toward a recession. Many companies have begun tightening their belts in anticipation of an economic slowdown and are looking for new ways to optimise their business operations including vendor spend management.

Planned technology investments, such as digital transformation projects, are often one of the first things companies scale back in such times as they aim to more aggressively control costs. This reaction is natural but should be done with a thoughtful differentiation of each technology investment, as certain technologies deliver the business benefits companies need to survive—and even thrive—in a downturn.

As business leaders continue to prepare for a declining economic environment, there are four ways their companies can leverage automation and AI in the procurement process in particular, steps that not only assist in times of spending restraint and caution such as today, but also importantly lay the groundwork for staying out in front when business growth returns.


Identify new opportunities for savings

Having more cash on hand helps your business withstand the financial pressures that naturally come with a recessionary environment. One of the first things most procurement teams do when trying to save money is look for alternate suppliers that can offer the same quality and service at a better rate. That process takes time – in some cases, it can take many months just to identify a replacement vendor, much less onboard the new supplier -- and with every day that passes during this process, you’re paying the higher costs and missing out on savings opportunities.

Imagine if the moment the economy started to decline, your procurement team immediately knew how your current suppliers stack up against others within the industry. They knew which partners were already delivering the best prices and best service and where it would be most optimal to shift to different supply sources across different business inputs and across geographies for better rates, without negatively impacting the business. You’d be able to achieve immediate savings. 

AI is already enabling this type of accelerated transacting and smart organisations are putting it into practice. The technology helps procurement teams quickly identify the right partners for the business and ensures everything the organisation purchases is at the lowest effective price, with reference to industry benchmarks. This is an important capability for every organization at a time when financial liquidity is of paramount importance.


Maximise everyone’s time

Some companies are forced to operate with leaner teams during a downturn due to layoffs and hiring freezes. Others simply have fewer resources at their disposal due to cost-cutting measures. Work still needs to get done in a declining economy. Staff burnout and disengagement become bigger business risks during times of larger workloads and rising stress levels with an uncertain forward economic path.

Given your people are a critical asset and competitive differentiator, and the high financial cost of employee turnover, it’s imperative in any economy that business leaders equip their employees to be more productive, empowered, and satisfied in their work.

Automation and AI are invaluable tools for boosting employee efficiency and engagement. The technology fills talent gaps across procurement teams by autonomously executing many routine and repetitive tasks, including creating and sending out RFPs, paying invoices, and more. This reduces employees’ workloads and opens up their capacity to focus on more strategic work, such as cultivating supplier relationships, driving innovation, and creatively solving problems.

Ultimately, procurement teams can focus on the right things that will drive the business forward and help it survive a recession, instead of getting bogged down in back-end processes while being pressured to do more with less. Leave the scalable and repeatable processes to AI-enabled software and let your people focus on higher value-add activities.


Reduce supply chain risk

A down economy brings heightened supply chain risks. Softening demand and supplier financial health are top of mind for companies during a recession. Other risks, such as geopolitical, ESG, and regulatory concerns don’t go away just because other economic pressures become more immediate.

Access business networks where suppliers are vetted, fully cataloged, and readily accessible. AI-enabled technologies in certain procurement applications today can look across these large networks to match your company with the suppliers that can deliver your specific product criteria and are based in low-risk regions, meet compliance requirements, have strong ESG and financial health ratings, and satisfy other important risk considerations. The technology can also analyse transactions that flow through the network and prescribe actions to eliminate bottlenecks and improve cycle times and costs. \

Recessions can bring considerable supply chain disruption, but technology can enable agility and efficiency to help you weather the storm today and can equip you with a resilient commerce network when customer demand rebounds.  


Strengthen supplier partnerships

Business continuity, stability, and growth all hinge on collaboration with your strategic suppliers. One of the most valuable steps companies can take to build relationships with these partners is to help them drive efficiencies. The more freed up suppliers are from a workload and time perspective, the more they can collaborate with you on issues that arise during a downturn and drive mutually beneficial outcomes.

Look for ways to reduce friction across both your own processes and those of your suppliers. Where can your suppliers apply AI to help streamline their RFP responses? Are their invoice management and collection processes automated? How many marketplaces and directories do they use to connect with buyers? Where can you modify your approach to make the entire process easier?

Making these types of recommendations and actively applying technology on both the buy-side and sell-side improves the end-to-end experience and goes a long way in strengthening supplier relationships in mutually beneficial ways. Given 57% of suppliers say they lack a fully streamlined commerce experience, there’s plenty of opportunity on the table to improve this important aspect of procurement.

Think big and long-term

There’s a clear case for continued investment in digital transformation. Imagine if you stayed the course on your automation and integrations of AI into your processes while your competitors paused or scaled back.

Beyond being in a better position to manage the effects of a downturn, the cost savings and sound risk and supplier management practices you enable today to gain greater efficiencies out of your operations would then give you an advantage when the economy bounces back. While your competitors are getting their bearings, trying to shift to growth mode and picking back up strategic technology deployments, you’ll already be operating at full speed with automation that reduces key growth bottlenecks.

Jeff Laborde, CFO of JAGGAER, has more than 25 years in the technology finance role including extensive hands-on experience in technology capital markets and M&A as an investment banker with Goldman Sachs and running private equity-backed software companies with firms including Vista Equity, Genstar, Apax and Cinven.


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