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Using the Downturn toYour Advantage
 
Driving Results: Lessons We Can Apply to a Downturn
In Washington, politicians are already using the economic downturn as an opportunity topush through legislation that might otherwise not get past committee discussions duringmore normal economic cycles. Along the same lines, especially in the financial servicessector, companies are engaging in M&A activity that under usual market conditionswould face significant regulatory and anti-trust scrutiny. What can we learn from theseexamples? Just as legislators and dealmakers are using the economy as a guise toimplement programs and goals that might prove difficult under normal operatingconditions, procurement organizations can take advantage of the downturn as well,pushing forward their own “legislative” agenda to improve business performance. Thetiming for such action could not be better. ISM’s manufacturing and non-manufacturingindexes continue to show a contracting economy. More people are staying on theunemployment benefit rolls for an extra week or longer than at anytime in the past 40years. And unprecedented volumes of public companies are releasing dismal earningsreports and projections for 2009. Now is not only a good time to push through costsaving agendas that cut across the business, it is perhaps the best possible period inmore than a lifetime to implement such initiatives.For politicians, there are numerous legislative ironies involved with getting thingsaccomplished in a recession. Besides the obvious (i.e., using the downturn to pushthrough what might be unpalatable under normal circumstances), there are other benefits to taking action in a downturn. One, of course, is bi-partisan support. But theconcept of bi-partisanship should extend beyond the political. Just as in Washington,recessions can enable potentially strange bedfellows in companies to join in supportunder the simple rationale that “we’re all in this together”. Indeed, the parallels thatprocurement, finance and other organizations have when it comes to implementing costreduction programs amidst the same economic backdrop are similar in a number of ways. Our recent customer experiences suggest that the recession affords an excellentopportunity for companies to tackle cost reduction projects that would otherwise be toocontroversial or require too much change management to undertake in a business-as-usual environment. In this analysis we will explore a number of these initiatives, offeringpragmatic suggestions for how companies can use the downturn to drive new rounds of cost savings opportunities throughout the business. While what you are about to readmay not result in a filibuster-proof majority inside your company, it will most certainlypoint the way to building savings-driven consensus.
Using the Downturn to Your Advantage
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Copyright © 2009 Ariba, Inc. All rights reserved.
 Ariba SupplyWatch
providesinsight into the latestcategory sourcing trendsand pricing/savingsopportunities across dozensof spend categories. Thisfree resource is based onthe market intelligence of more than 400 strategicsourcing professionals in the Ariba Global ServicesOrganization. To learn aboutthe latest pricing trends andopportunities from
 AribaSupplyWatch
and to readthe latest feature story onwhy some Procurementprofessionals are smilingwhen a global recession isupon us and a turn-around isnot on the near-termhorizon, please visit
www.ariba.com/SupplyWatch_q109.
 
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 Four Strategies for Success – Taking Advantage of the Downturn
1.Using working capital management to “work” out of the downturn together 
Working capital management strategies that integrate procurement and finance –specifically A/P, treasury and supplier management teams – can help companies to bothpreserve and profit from their working capital, which has become all the more preciousamidst the credit crunch. One of the largest effects of the downturn on both companiesand their suppliers has been the challenge of securing operating credit. But whentraditional credit and banking channels pull in their credit ropes, it creates an opportunityfor buyers and suppliers to collaborate, enabling a new source of capital and potentialliquidity. For most companies, the disintermediation of bank funding does not happenovernight. Perhaps the largest inhibitor to creating new sources of liquidity and potentialcapital is the paper-driven process that plagues most A/P organizations. Paper not onlylimits visibility for both buyers and suppliers – it also creates latency throughout therequisitioning, approval and payables process. Whether a buying organization is lookingto achieve savings through offering fixed or variable discounts to suppliers or, on the flipside, is looking to extend its days payables outstanding (DPOs) – or a combination of both strategies, depending on the circumstances and opportunities – automating anddigitizing the A/P process is an essential first step to create flexibility in working capitalmanagement strategies. After implementing basic process enhancements and invoice automation capabilities,companies must next deploy the appropriate set of internal and external workflows todrive flexible working capital management strategies. This broader process, known asElectronic Invoice Presentment and Payment (EIPP), puts in place workflows thatsupport and enhance existing ERP payment capabilities, but that are not available fromthese providers today. The most pragmatic EIPP infrastructure approaches includesuch capabilities as dynamic discounting, supply chain financing and direct-connectionto suppliers (beyond basic EDI and connection portals) with a key emphasis on
Using the Downturn to Your Advantage
Copyright © 2009 Ariba, Inc. All rights reserved.
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