Managing demand and implementing immediate measures
Demand structures have changed massively due to the crisis, especially indirectly. Under the current conditions, IT departments in many companies, for example, have had to spend more to ensure their digital infrastructure fully supports working from home. Conversely, travel costs have dropped massively. In marketing, on the other hand, larger in-person events have been cancelled, but the costs for online communication have risen.
In addition to such involuntary changes in operations and the associated costs, the crisis has forced many companies to implement budget cuts and spending freezes across the board to protect the core business. As the economy begins to recover, opening such budgets may seem reasonable, however this risks missing opportunities to stabilize costs at a more competitive level.
Many departments have had to question current practices and demands on suppliers, identifying ways to reduce requirements, volumes, or insource. As an example, budgets for printed sales materials went down in the pandemic, and now this is an excellent opportunity to cement the shift to digital, rather than fall back into old habits.
A company-wide re-evaluation of demand management should take into account the latest shifts in operations and customer behavior, as well as the best current view of the rebound for the company’s market. Based on this, budgets should be re-distributed within the company, with the ambition to stabilize them between historical and lockdown levels.
The decisive factor here is to not leave this solely to the specialist departments such as IT, or the line business. Procurement can help identify concrete potentials for cost reduction and define measures to accomplish that. The best results will be achieved by combining reasonable top-down budget revisions, with a mandate for procurement to facilitate demand management exercises in relevant departments.