It seems as though climate change and recent economic upheavals may have more in common than one might expect. It isn’t so much that the weather is getting notably worse, but that short-term changes seem to be becoming more extreme. Recent fatal storms in KwaZulu-Natal this holiday season and flash floods in the Cape last year are just cases in point.
“The recent collapse in financial and commodity markets has been most noticeable for its severity, but more alarmingly, for its speed. In a little over four months platinum fell from $2,250 to around $900 an ounce, oil from $136 to under $40 a barrel and the bulk shipping rates for dry cargo by 90%”, Alan Low, Managing Director of Purchasing Index, told SmartProcurement. The movement in the unleaded price of petrol in South Africa over the last 13 months looks like this (up by 40% and down by 44% all in just over a year):
Making business decisions in this economic environment requires tools that provide information holistically and in real time. Gone are the old days where reports had to be specified, written by a technical person who understood the relevant system language and then reviewed by the originator. This cumbersome process not only took days or weeks but tended to be iterative as users found errors or needed slight changes to the report contents. In the meantime decisions were often delayed and consensus hard to accomplish where reports drawn by different departments on the same subject showed varying results.
“Modern systems allow users to define reports for themselves and in real time produce highly visual graphical information which are intuitive and allow for instant decision making. These systems allow users and cross-functional teams to define reports during their meetings and allow for dramatically quicker and more effective management decision making”, Low explained.
In addition, the sudden and significant movements in commodity prices will continue to have a dramatic effect on organizations’ profitability. The drive to mitigate and delay price increases has suddenly been replaced by ensuring that price decreases in input goods and services are implemented as soon as possible. Without robust, relevant information negotiations with suppliers, procurement professionals may have to rely heavily on the supplier’s honesty and goodwill – with varying results! Understanding what is happening in the rest of the (local) marketplace, through benchmarking, etc , can assist buyers to see what is possible.
“Most organizations that are trying to save money during a global recession have two basic choices – get rid of staff or trim input costs of goods and services. In South Africa where so many are already unemployed and the skills shortages across many sectors continue, savings on the purchase and use of goods and services must be the first choice”, Low concluded.
Alan Low can be contacted on the details below:
Telephone: +27 11 803 0005
Cell: +27 84 890 0005