That companies are under financial pressure is not in question. The issue is; what strategies are companies going to adopt to survive?
A report just published by Ernst & Young, “Opportunities in Adversity”, sheds some light on this highly pertinent subject. The survey-based study reveals the wide corporate need to conserve cash with over 80 per cent of respondents having already undertaken a major costs saving analysis. Nearly two thirds had instigated a headcount reduction programme and over half had rationalised IT spend.
In particular, close attention has been paid to customers and the supply chain. Some 60 per cent of those interviewed in Europe had seen a deterioration in creditworthiness of customers and that there was an increase in time lag in ‘order to cash collection’.
In response, companies are focusing on key accounts (75 per cent) and developing new products (40 per cent). A third of those in the survey had broadened their customer basis and had terminated contracts with high-risk customers.
Interestingly, when it came to suppliers, there was an apparent split between two very different strategies. Half have trimmed their supplier base to achieve better prices or terms, while the other half have broadened their supplier base to reduce the impact of the failure of a key supplier.
But when it came to asking those surveyed ‘where they will be looking to save cash in the future?’ 58 per cent said they expected significant or reasonable savings in their supply chain operations, and that was opposed to sales and marketing (42 per cent), operations (56 per cent) and IT functions (43 per cent).
It seems clear that keeping a close eye on suppliers is going to place a great emphasis on ensuring that supplier information is up-to-date, accurate and readily available. Next to cash, information is king.