The US economy has been fairly solid lately. But with the Fed meeting this week, much press coverage is dedicated to speculating on what is ahead.
That got me thinking about what things are like when the economy is bad and how it affects the careers of purchasing professionals.
I have always said that the first budget line items to get cut when the economy turns sour are “The Three T’s”: travel, technology, and training. Unfortunately, cutting training – particularly purchasing training – in challenging economic times isn’t always very smart.
In rough economic periods, sales decrease from levels achieved in good economic periods. So, providing that all else remains the same, profits will also decrease. So slashing the training line item is theoretically a way to sustain profit levels.
But, practically, that doesn’t work so well.
In tough economic times, smart purchasing becomes MORE important. The market prevents you from improving profits through increased sales. But you can improve profits through reduced costs.
And while cutting training is one way of reducing costs, the fact that some training for bottom-line-impacting departments produces a return on investment (i.e., a positive contribution to profitability that exceeds the amount paid for the training), sustaining or increasing investment in results-oriented training can be a more effective way of maintaining profit levels. Because smart purchasing can reduce costs, purchasing’s value can become much more evident in tough economic times.
I look to the example given in the success story of Carol Gissell, SPSM. In just one small negotiation, she used what she learned in the SPSM Certification Program to save her company 2x what they invested in her training. And she can reuse her new skills over and over to make the return on that investment simply massive!
Another silver lining to a bad economy is that purchasing professionals can use the “we simply cannot afford that price” argument in negotiations more effectively.
Who is gonna believe a buyer from ExxonMobil who would use that phrase in 2007? But when uttered from the mouth of a buyer from the new home construction industry in the same year, that phrase has a much higher probability of being persuasive.
Hopefully, the economy will continue to prosper. But if it stumbles at some point, hopefully intelligent decision-makers will see the bottom-line value of having a more skilled workforce – not just in purchasing, but in all disciplines that can achieve ROI.