Even as markets remain volatile, CFOs should push forward with technology investments
Despite the latest drop in CPI percentage, inflation remains high, economic uncertainty continues to swirl, and consumer savings are dwindling. As a result, demand is dropping, and the word “recession” continues to be tossed around like empty peanut shells at a baseball game. Yet, a recent Wall Street Journal article points out that despite a universal shift to cost cutting initiatives across industry sectors, most companies are looking to do so without cutting employee headcount (tech and real estate excluded).
It’s great to see CFOs are taking this approach. When companies suddenly find themselves with lower sales forecasts and decreased demand levels, headcount is often the first thing considered in order to minimize the impact of smaller revenue projections.
Fortunately, many companies now realize just how difficult it is to get that talent back when economic cycles once again turn positive. Not to mention the often astronomical costs associated with the inevitable need for backfills will eat into any savings previously identified or accomplished in the short term.
The article also states that many may look to reduce technology investments. However, it’s important to note that this technology investment strategy may prove a shortsighted approach. Even as CFOs grow increasingly pessimistic and risk averse, if anything, the past few years have all but proven that digital transformation and emerging technology is needed more than ever to navigate a continually shifting global marketplace.
While avoiding lengthy implementations and large scale overhauls of your tech stack may be advisable, there are still a variety of “Goldilocks” tools that are purpose-built to address specific challenges, deliver quick value, and require minimal IT involvement. Yet, according to a recent poll conducted by AlixPartners, “98% feel they must revamp their businesses to cope with an era of ‘relentless disruption.’” But “85% say they’re not sure where to start to make the changes.”
One crucial area of procurement and operations that many, if not most, enterprise companies overlook involves the optimization of indirect materials. Not only do indirect materials allow your organization to quickly identify spending and cost reduction opportunities, gaining full visibility to your supply network allows you to determine where materials can be shared across facilities to utilize existing materials, exercise spend avoidance, or disposition items to aftermarket vendors.
Specifically, you should evaluate available purpose-built solutions to optimize these processes and functional areas of your business. These tools should be equipped with highly developed AI & ML that allow you to be strategic in your material alignment by employing a scalpel vs. ax approach to analyzing your materials data.
While there are many benefits associated with artificial intelligence, staff efficiency is often the primary reason for embracing this technology. AI can process multiple data sets simultaneously for faster results. This allows your staff to eliminate manual processes in order to move directly to the decision-making stage. As teams spend less time on data management, and more time on process improvement, organizations see better results, less waste, and faster time to value on new technology investments.
Additionally, embedded machine learning helps the solution learn from your users to not only capture internal expertise, but also for constant improvement as far as recommendations for decision making are concerned.
While new technology investments may seem daunting in the near-term, drastically reducing your growth model will only leave your company that much more behind the curve when markets turn favorable. Tomorrow’s industry leaders will be the ones who continue accelerating their digital transformation to gain the visibility and collaboration needed to sustainably remove wasted working capital and remove supply risks, all while keeping your team fully intact armed with the tools to tackle whatever new challenges come along.