Global Trade: Now Is Not the Time To Watch and Wait
By James Stirk, Chief Revenue Officer, Tradeshift
Tradeshift’s Q2 Index of Trade Health provided an indication of the uneven conditions many businesses are facing heading into the second half of the year. As senior business leaders weigh up their next move, James Stirk, Chief Revenue Officer at Tradeshift explains why businesses already ahead of the digitalization curve see an opportunity to extend their advantage.
There’s a running joke that ‘experts’ correctly anticipated seven out of the last three macroeconomic events. Unfortunately, it’s doubtful that their success rate will improve in the future.
Economists started the year predicting an inevitable and painful global recession. Consensus is now drifting, and predictions for the next six months are as good as a coin flip.
We must accept the reality of higher volatility in our business environment, but the core principles of resilience and agility remain as relevant as ever. Companies must master the delicate balance between reducing costs to survive today and investing to grow tomorrow. For finance and procurement leaders, having a clearly defined and well-executed digital strategy will have a significant bearing on both short-term and long-term objectives.
Automate Where You Can
According to analysts at Gartner1, businesses should adopt an offensive approach to their digital and IT strategy. Investing in the right digital initiatives can mitigate the negative effects of uncertainty. Gartner specifically highlights automation as a prime area for investment.
The advantages are apparent. For instance, e-invoicing solutions offer cost-saving potential, operational efficiency, and improved cash flow management, making them highly appealing during economic downturns.
By accelerating the invoice-to-payment cycle, businesses gain more opportunities to optimize their working capital. Better and more accurate data can be utilized for strategic decision-making across the business. Digital connectivity also supports more collaborative relationships with suppliers, many of whom may be experiencing financial pressures.
Grow Your Digital Advantage
As CFOs seek ways to reduce costs, automation eliminates the need to scale resources up and down based on market conditions. However, Gartner’s analysts are optimistic about digitalization for reasons beyond cost reduction. Recent events, such as the pandemic, have highlighted the importance of digital investments.
When the pandemic first hit, businesses that had already invested in digitalization projects found it far easier to adapt to an almost overnight shift in working conditions. Yet, that didn’t mean that these companies coasted through the crisis relying on their past tech investments—quite the opposite.
According to a KPMG survey2, digitally leading companies were more inclined than non-digital ones to increase their technology investments due to COVID-19. Organizations that were “very” or “extremely effective” at using digital technologies saw a 50% increase in spending between 21% and 50%.
In the short term, businesses that digitize will encounter fewer struggles. The most astute companies will also view this period of uncertainty as an opportunity to gain or extend their competitive advantage. In that quest for an edge, the supply chain will be one of the key battlegrounds where winners separate themselves from the pack.
Rethink Your Source-To-Pay Process
Supply chain bottlenecks may well have eased, but only the most optimistic of business leaders would claim that this pattern of regular disruption will not continue in the future.
Supplier diversification is increasingly seen as central to the agility businesses need to embed into supply chains to manage all manner of different demand shocks. Reconfiguration on this scale is complex, requiring businesses to quickly identify, vet, and onboard large numbers of new suppliers. Accommodating shifting demand patterns will also demand digital connectivity that allows buyers and suppliers to collaborate in real-time.
Procurement teams using 20th-century models and technologies will struggle to deliver the ingredients businesses need to remain agile. Diversification efforts aimed at building agility will quickly unravel if the systems and processes underpinning such a transition remain slow, cumbersome, and antiquated.
For procurement leaders tasked with remodelling the fabric of their supply chain, the B2B marketplace model can be transformative. The ability to access a large number of pre-vetted suppliers through trusted operators can simplify supplier search, negotiation and contract management. That’s especially true in areas of indirect spend which take up a disproportionate amount of time; time that could be better spent on more strategic tasks.
In many cases, buyers can effectively outsource due diligence requirements to the marketplace operator, who is then responsible for serving up suppliers that check the right boxes. This has potentially significant implications in key areas of the traditional source-to-pay process. The same model can also help organizations short-cut the process of identifying and nurturing relationships with suppliers with strong ESG credentials – essential as businesses come under increasing scrutiny from regulators and consumers.
Seize the Moment
From better insights to faster decision-making, agile sourcing and even the potential to explore new revenue streams, a smart, well-executed digitalization strategy gives businesses visibility over potential issues, time to deal with them and a range of options over the course of action to take. Regardless of the ups and downs of the economy, these are all fundamental qualities in successful business operations. Be sure that businesses already ahead of the digital curve will now intensify their efforts. It’s not the time to passively observe; it’s the time to take action.
1 Gartner; June 2023: Recession Advice: Go on the Offensive With IT Investments
2 KPMG; 22 September 2020: “COVID-19 forces one of the biggest surges in technology investment in history”