Summary
I have been looking for a broader analysis on the CV-19 lockdown impact. The World Business Council for Sustainable Development estimates that “the full or partial lockdown measures were affecting almost 2.7 billion workers in early April – four in five of the world’s workforce.” Michael Dell recently posted on LinkedIn that “In India, informal sector workers make up 85% of the workforce. Most had their income cut in half or more as a result of the COVID-19 pandemic.” We’ve known that the stresses of loss of income, business failures, postponed diagnostics and health procedure will cause additional loss of life. I’ve included an article this week to provide perspective on the bigger picture. When considering the impact that supply chain teams have, from raw materials to end products, reopening and moving to full economic recovery has far reaching, positive global impacts.
Continuing with the theme of expense management from the prior weeks, I’ve included two pieces for you to consider.
- The first is a focus on indirect spend ideas to utilize the economic downturn to your advantage in negotiating better agreements.
- The second is “7 Creative ways to kick-start your expense management program”, from the Art of Procurement.
Notes: European supply chain capacity ramped up from 46% last week to 60% as of 5/31/2020
Top Links
“The COVID-19 shutdown will cost Americans millions of years of life“ The Hill, May 25, (5 min read) by Scott Atlas, a physician at Stanford University Hoover Institute, and 3 business professors from Chicago, Duke, and Hebrew Universities.
- The government’s shift from “flattening the curve to avoid hospital overcrowding” to now preventing the spread of Covid-19 disease at all costs, has significant consequences
- The lost economic output in the U.S. is estimated to be $1.1 trillion for every month of the economic shutdown (5% of GDP)
- They estimate* at least 700,000 lost years of life per month, or about 1.5 million
- 200,000 per month from unemployment and individual and business financial stress
- 500,000 estimated due to missed medical care, screenings and care for cancer, stroke, heart, organ transplant, etc.
- This far surpasses the COVID-19 current total of 800,000 lost years of life
* Using numerous National Institutes of Health Public Access publications, Centers for Disease Control and Prevention (CDC) and Bureau of Labor Statistics data, and various actuarial tables
“Now is the time to negotiate indirect spend” – Supply Chain Drive, Rich Wiessman, May 28 ( 3 min read)
- Insurance – All insurance categories are under pressure. Some insurance companies are already offering rebates
- Utilities – locking in lower rates or migrating to new technologies
- Travel – Review agreements with agencies and airlines with a focus on getting back funds due to cancellation and rebooking charges
- Real estate – Landlords may be willing to renegotiate rental agreements. Consider facility management costs, security, janitorial services and changes to factory and office layouts
- Service contracts – 1) service contracts should be extended and renegotiated to reflect less usage. 2) Avoid evergreen contracts, those agreements that renew automatically. 3) Review warranty agreements
- Transportation and logistics -while buyers may find cost savings, they should focus on service and long-term continuity of supply
“7 Creative ways to kick-start your expense management program” – Philip Ideson, (14 minute listen)
- Leverage a GPO, group purchasing organization model, e.g. providing GPO access to your customers
- Buying desk for low-dollar spend items (in a low cost geo for purchases above p-card limit)
- Provide greater access to negotiated deals (enable self-service or a guided buying solution on internal website)
- Audit supplier invoices for accuracy (several service providers that do this)
- Increase P-card usage (increase total spend to get the rebates)
- Creative bartering (reduce the cost of something you want to buy by offering something you are not fully utilizing, like building space)
- Targeted use of subject matter experts by utilizing as needed, “experts on demand” program
Note: I am posting my past letters at sc-exec.com/newsletters and have added the ability for people to subscribe. Please feel free to forward the newsletters to your colleagues.
| Subscribe & Download Past Newsletters |
Best regards,
Don
Don K Brown