PLANS & TACTICS TO RECESSION-PROOF THE ENTERPRISEA SURVEY OF PROCUREMENT & FINANCE PROFESSIONALS

INTRODUCTION 3

FINDINGS AT A GLANCE 4

EXECUTIVE SUMMARY 6

RECESSION ON THE HORIZON 8

PREPAREDNESS CONFIDENCE 9

COPING APPROACHES 10

EFFECTIVE TACTICS 10

TIGHTENED CATEGORIES 11

SCRUTINIZED SUPPLIER TIERS 12

SAVINGS REALLOCATIONS 13

CONCERNS ABOUT IMPACT 14

TARGETED SAVINGS GOALS 15

REGIONAL ANALYSIS 17

INDUSTRY ANALYSIS 19

ABOUT THE PARTICIPANTS 21

ACKNOWLEDGEMENTS 23

INTRODUCTION

2

TABLE OF CONTENTS

Welcome to the study "Plans & Tactics to Recession-Proof the Enterprise: A Survey of Procurement & Finance Professionals". The U.S. economy is reaching a record-breaking period of expansion that started 10 years ago. There is a reignited interest around when the next recession could happen. While many fundamentals suggest the economy remains healthy, there are also looming signs of a slow-down, or even a recession. Sentiment surveys point out that executives are concerned that job markets, credit risks and tariff policies could press the economy to decelerate. Who should read the study Suplari surveyed Finance and Procurement professionals about their concerns, preparedness and coping tactics for an eventual recession or economic downturn. At large, business executives, analysts and the general public will find this study helpful to further assess the odds and outlook for an eventual recession. More specifically, Finance and Procurement professionals can use the report to plan ahead and prioritize practical approaches about:

• Plans to avoid disruption of performance and profitability• Strategies and levers to quickly reduce cost and risk• Specific tactics in each industry sector to deal with a recession• Categories and budgets that come under greatest scrutiny

We hope you find this report valuable and invite you to find other related resources at www.suplari.com/recessionsurvey. You can join the conversation and share your comments at our LinkedIn page.

INTRODUCTION

INTRODUCTION

3

SURVEY FINDINGS AT A GLANCE

55% of Procurement and Finance professionals expect a recession before the end of 2020 2020

More companies focused on cost savings this fiscal year

Cost savings goals cluster in the range of

12%

18%

20%

13% 12%7%

18%

1-4%5-9%

10-14%20-24%

15-19%25%

or

higher No

goal

5-14%

Last FY

76%

55%

Prepared

Not Prepared

Don’t Know

When do you think the next recession is most likely to start?

Within

12 months

12-24

months

Not

forseeable

Is your organization prepared with a strategic plan for cost savings in times of

economic need?30%

61%

9%

4

FINDINGS AT A GLANCE

FINDINGS AT A GLANCE

Industries have their own strategies to generate cost savings and mitigate risk

83%of Tech/SAAS focus

on

Renegotiating

contracts

50%of Retailers

focus onScrutinizing PO approval

Those preparing proactively pursue these top cost-saving strategies

56%of Manufacturers

focus onDelaying project

expenditures

60%

When pressed to realize quick savings

mentioned they will tighten scrutiny of travel category

49%Contract Renegotiation

45%Vendor Consolidation

67% mentioned reinvestment in long term projects

37% mentioned both

61% mentioned savings go straight to the bottom line

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6

EXECUTIVE SUMMARY

EXECUTIVE SUMMARY

Finance and Procurement professionals operate closely and holistically in relation to the matters of spend management, purchasing activity, savings optimization and risk factors. They are also likely to be the first to perceive and deal with the impact of a recession in their organizations. Their functions are well positioned to take a proactive and leading role preparing their enterprises to avoid business disruptions. This study reveals what your peers in those roles are predicting and doing in order to prepare.

Key Findings

Only a small percentage, 6%, are concerned with a recession hitting within 6 months. Yet a majority 55% believe it will take place within 18 months, before the end of 2020. The percentage is even higher, 77%, when counting the larger group expecting a recession to occur within the next 2 years. Smaller companies are more skittish about the economy, with more of them expecting a recession to hit in the next 12 months.

Despite an encouraging 61% of respondents demonstrating confidence in their companies’ preparedness for times of economic needs, there remains an alarming 30% feeling unprepared or unaware of their organizations ability to cope with an upcoming recession. The other 9%, although also feeling without preparation, simply don't foresee a recession on the horizon.

Executive Procurement and Finance professionals expect they will be pressed to quickly find cost-savings. In case of economic need, Travel becomes by far the most scrutinized or tightened spend category. Listed next, were Facilities as well as Office Equipment and Services.

The main ‘go-to’ tactics or levers to optimize spend and risk are Contract Renegotiation and Vendor Consolidation. Yet, different industry sectors ranked other preferred tactics specific to their business.

More companies have established cost-savings goals this fiscal year, and now 8 out of 10 companies have savings goals. Among the companies which do have savings goals, the majority aim for 5 to 14% in savings.

Respondents are mostly concerned about the impact a recession could impose on their budgets and headcount cuts, even more so than the risks associated with loosing suppliers or issues about supplier's business continuity and solvency.

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EXECUTIVE SUMMARY

Recommendations

• Even if a recession doesn’t come to pass, procurement and finance organizations should not wait for an economic downtown to put an ironclad plan in place. Enterprises need and should be proactive, with an always-on systematic approach to managing spend and margins.

• Now it's the time to examine spend categories, supplier’s stability and upcoming contract renewals. Make sure that your Finance and Procurement teams, as well as stakeholders in the business, are equipped with proper visibility and proactive insights into their spend, suppliers and contracts activity.

• The survey did not reveal statistical differences in the responses from professionals in Procurement and Financial roles. Organizations should assure that decisions made with respect to cost savings are aligned with Procurement and Finance functions.

• When it comes to supplier management, it will pay off to have processes and technologies to systematically track supplier information, their business stability and operational continuity risks. Companies should get proactive to find spend optimization opportunities beyond the group of top suppliers alone. There is significant opportunity to also optimize tail spend and suppliers.

0-3 months

3-6 months

6-12 months

12-18 months

18-24 months

Not in the forseeable future

1%

5%

24%

25%

22%

23%

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RECESSION ON THE HORIZON

WHEN DO YOU THINK THE NEXT RECESSION WILL START?

MOST PROCUREMENT AND FINANCE PROFESSIONALS FORESEE A RECESSION WITHIN TWO YEARS

Smaller companies and those in the North-Central region think a recession will hit sooner.

77% of all respondents think a recession will occur within 1 to 2 years. However, 40% of smaller companies (those with revenue of less than $250M) think a recession will hit within 12 months, compared to 33% of mid-size companies (revenue between $250M and $1B) and just 22% of large companies (revenue greater than $1B).

C- and VP-level executives are more likely than others to see a recession within the next 12 to 18 months (45% v. 23%).

Prepared

Not Prepared

Don’t Know

When do you think the next recession is

most likely to start?

Within

12 months

12-24

months

Not

forseeable

Is your organization prepared with a strategic plan for cost savings in times of

economic need?30%

61%

9%

9

PREPAREDNESS CONFIDENCE

RESPONDENTS ARE OPTIMISTIC ABOUT THEIR ABILITY TO DEAL WITH A SLOW-DOWN

61% agree (24% strongly) their company is prepared with a plan to deal with an economic slow-down.

Smaller companies (revenue <$250M) are less confident in their answer. 48% agree compared with 61% of the average response.

Although a majority, 61%, feel they are prepared, nonetheless there remains 30% who foresee a recession coming that are not prepared or don’t know if they are prepared.

DOES YOUR ORGANIZATION HAVE A COST SAVINGS PLAN FOR TIMES OF ECONOMIC NEED?

24%

ye

Somewhatagreeagree

Somewhatdisagre

Strongldisagree

Don't knowStrongly agree

37% 11% 17% 12%24%

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"GO-TO" COST-SAVINGS LEVERS IN AN ECONOMIC DOWNTURN (TOP 3)

WAYS TO COPE WITH AN ECONOMIC SLOW-DOWN

Contract renegotiation (49%) and vendor consolidation (45%) are the top strategies procurement and finance professionals turn to for cost-savings.

Smaller companies with revenue less than $250M are less likely than larger companies to invoke outsourcing as a strategy (8% v. 30% of companies with revenue of at least $250M).

The largest companies, those with revenue that exceeds $5B, are more likely than average to delay project expenditures (53% v. 34%) and less likely to focus on consolidating vendors .(24% v. 45%).

Early contract renewal 16%

Put more suppliers under contract 17%

Demand aggregation 25%

Outsourcing 25%

26%

Put more spend under management 30%

33%

Delay project expenditures 34%

Vendor consolidation 45%

Contract renegotiation 49%

Avoid maverick and bypass purchasing

PO creation and approval process scrutiny

EFFECTIVE TACTICS

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Travel is the first area to be scrutinized in times of economic stress, named by 60% of respondents.

Large companies with revenue over $1B are even more likely than smaller companies to focus on travel (72% v. 50%).

Both the largest and smallest companies are more likely than others to focus on facility expenditures. 58% of companies with at least $5B in revenue and 52% of those with less than $250M, compared with 32% of companies with revenue between $250M and $1B.

Managers and others are more likely than C- and VP-level executives to focus on facility expenditures (54% v. 25%).

COMMODITIES OR CATEGORIES MOST SCRUTINIZED IN TIMES OF DOWNTURN

Travel

Facility expenditures

Marketing

Professional or HR services

Information Technology

Direct materials

Financial services

25

43%

60%

40%

32%

30%

24%

22%

22%

TIGHTENED CATEGORIES

Logistics

25%

<$250krevenue

$250k-$1Brevenue

$1B+revenue

Top-tier 48% 27% 46%

Middle-tier 44% 39% 40%

33% 20%8%Tail-tier

12

Suppliers that garner the greatest spend get the most scrutiny.

In times of economic stress, procurement and finance professionals make efficient use of their focus. Top-tier and middle-tier suppliers are more likely to get greater scrutiny compared to tail-tier suppliers.

Small-size companies are less likely than others to focus on tail-tier suppliers.

SUPPLIERS THAT GET THE GREATEST SCRUTINY DURING A DOWNTURN

Top-tier: Handful to dozens of suppliers generating 40% of spend

Middle-tier: Hundreds to thousands of suppliers generating the next 40% of spend

Tail Tier: Thousands of suppliers generating the next 20% of spend

SCRUTINIZED SUPPLIER TIERS

Pass along discounts to customers

Gets redirected to other departments

Pay down debt

Departments reinvest within budget

Savings go straight to the bottom line

Reinvestment in longer-term and expansion projects

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SAVINGS REALLOCATIONS

WHAT TYPICALLY HAPPENS TO COST-SAVINGS FOUND BY PROCUREMENT? (TOP 3)

COST-SAVINGS TYPICALLY GO TO REINVESTMENT OR TO IMPROVE THE BOTTOM-LINE

Reinvestment in longer term projects and expansion, and using savings to improve the bottom line were the dominant responses (66% and 61%, respectively). 37% of companies employ both.

Responses differ by size of company.

• Among large companies with revenue over $1B, “Savings go straight to the bottom line” is the most typical response, cited by 74% of those respondents. Reinvestment in longer term projects and within department budgets are the second most typical, cited by 57% of these respondents for each.

• Mid-size companies with revenue in the range of $250M to $1B are more likely to cite reinvestment in longer term projects (79%), followed by “savings…to the bottom line”.

• Smaller companies cite reinvestment in longer term projects (68%) followed by department reinvestment (64%).

21%

48%

48%

52%

61%

67%

Budget cuts on procurement spending

47%

9%Increases infraudulent

transactions

14%Increases in

non-compliant spend

17%Cash flow

and ability topay suppliers

33%

on quickly finding cost savings

28%Risks of supplier

business continuity or solvency 29%

Losing suppliersand/or contract partners

21%Finding new suppliers

C Suite demands

Other budget cuts in your department

47%

14

CONCERNS ABOUT IMPACT

TOP CONCERNS ABOUT HOW A RECESSION COULD IMPACT YOUR PROCUREMENT (TOP 3)

LAYOFFS AND BUDGET CUTS ARE THE GREATEST CONCERNS

When asked about their top concerns if a recession were to occur, Procurement and Financial professionals are most likely to cite impacts that directly affect their departments.

C- and VP-level respondents are more likely than others to cite “C-suite demands on quickly finding cost savings” (60% v. 23%), the concern cited by the most executive-level respondents.

Respondents from the largest companies, those with revenue in excess of $5B, are less likely than average to be concerned with layoffs in their departments (35% v. 50%).

Mid-size companies, those with $250M-$1B in revenue, are more likely than other size companies to cite “losing suppliers and/or contract partners” (42% of mid-size companies v. 22% of larger companies and 24% of smaller companies).

Ad hoc comments offered by respondents included concerns about rude employees, cuts in commissions, postponement of capital projects, and new clients.

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TARGETED SAVINGS GOALS

A 5-14% COST SAVINGS GOAL WAS THE MOST CITED FOR THIS FISCAL YEAR AND LAST

The most cited goal for this fiscal year is in the range of 10 – 14%, cited by 20% of respondents. 24% cited that same range as their cost–savings goal for last fiscal year. 18% said they had no such organizational goal for this fiscal year, whereas 24% had no such goal for last fiscal year.

Among the respondents who did not have a goal last year, 28% established one for this year.

12%

18%

20%

13% 12%7%

18%

1-4%5-9%

10-14%20-24%

15-19%25% or

higher No goal

ORGANIZATION GOAL FOR COST-SAVINGS: THIS FISCAL YEAR

ORGANIZATION GOAL FOR COST-SAVINGS: LAST FISCAL YEAR

1-4%5-9%

10-14%20-24%

15-19%25% or

higher No goal

12%

18%

24% 24%

10%8%

5%

16

In both years, larger companies – those with revenue of at least $1B – were more likely than others to have cost-savings goals in the range of 5% to 9% (28% v. an average of 18% among all company sizes in both fiscal years).

Companies in the range of $250M to $5B are more likely than larger and smaller companies to have a goal for this year (96% v. 80%).

Mid-size companies – those with revenue of $250M to $1B – were more likely than others to have cost savings in the range of 10-19% for both years (54% v. the average response of 33% this fiscal year, and 60% v. the average response of 34% last fiscal year).

For this fiscal year, the smallest and largest companies were most likely to not have a goal.

• 36% with revenue less than $250M did not have a goal.• 31% with revenue of at least $5B did not.• 4% with revenue between $250M and $1B did not.

Last year, C- and VP-level respondents were more likely than others to report their organizational goal was in the extreme ranges, as opposed to the middle ranges.

• 40% of executive respondents said their organizational goal for last year was 5-9% v. 12% of others.

• 20% said the organization had a goal of 20-24% v. 4% of others.

TARGETED SAVINGS GOALS

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REGIONAL ANALYSIS

REGIONAL ANALYSIS

Respondents from some parts of the country are more confident.

Respondents in the Mountain and Pacific regions are more optimistic. 43% think a recession will hit within 18 and 24 months, compared to an average response of 22%. By contrast, respondents located in the North-Central region are more likely than the average response to think a recession will come within the next 3 – 12 months (52% v. 29%).

Respondents in the South are also less confident their companies are prepared with a plan to deal with an economic slow-down. 41% of them think so, compared to 61% on average.

There are regional differences in companies’ strategic and tactical response.

Among respondents located in the NE, “savings to the bottom line” is the most-cited response (67%), followed by reinvestment in longer term projects (56%). Among North-Central respondents, reinvestment in longer term projects is the most cited (76%), with savings redirected to other departments as the second most cited (67%).

Respondents in the North-Central region are less likely than other companies to focus on travel. They are more likely than average to focus on logistics (43% v. 22%) and Professional or HR services (43% v. 30%).

In this fiscal year, respondents in the North-Central and South regions were more likely than others to have a savings goal of 15-19% (43% v. 6%).

REGIONAL ANALYSIS SUMMARY

Have higher savings goals in this fiscal year. More likely to target 15%-19%

Less confident their companies are prepared with a plan to deal with recession

Reinvestment in longer term projects is top, followed by redirecting savings to other departments

Less optimistic: Believes a recession is likely within the 3 to 12 month period

More inclined to boost the bottom line as top strategy, followed by reinvesting in longer term projects

More likely to focus on logistics and Prof./HR services. Less focused on travel

More optimistic:Believes a recession is likely to hit later than others

Calling out the responses by region that differ from the national aggregate abouttiming, preparedness, strategies and tactics to cope with a recession.

SOUTH

NORTH CENTRALMOUNTAIN/PACIFIC NORTHEAST

REGIONAL ANALYSIS

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INDUSTRY ANALYSIS

INDUSTRY ANALYSIS

Different industries employ different strategies for where to cut back during times of economic stress.

High tech and SAAS companies are more likely than average (83% v. 49%) to turn to contract renegotiation.

Manufacturing companies are more likely than average (56% v. 34%) to delay project expenditures.

Retail is more likely than average to scrutinize purchase order creation and approval (50% v. 26%) and less likely (17% v. 45%) to consolidate vendors.

Transportation and logistics companies are more likely than average (67% v. 16%) to renew contracts early, and less likely (11% v. 34%) to delay project expenditures.

Education companies are more likely than average (67% v. 34%) to delay project expenditures and less likely (17% v. 49%) to renegotiate contracts.

Different industries have different ways of handling cost savings.

Companies in Health Care and Life Sciences are more likely than average to redirect savings to other departments (89% v. 48%).

Companies in Transportation/Logistics and Fin Services are less likely to do so (33% and 37%, respectively.)

Fin Service companies are more likely than average to invest in longer term and expansion projects (80% v. 66%).

Professional and Business Services companies are more likely than average to reinvest within department budgets (83% v. 52%).

Different industries focus on different areas when looking for cost savings.

Manufacturing companies are more likely than average (67% v. 43%) to scrutinize facility expenditures, and office equipment expenditures (67% v. 40%).

Companies in retail are more likely than average to scrutinize IT (42% v. 25%) and less likely to scrutinize travel (17% v. 60%).

Health Care and Life Science companies are more likely than average (56% v. 30%) to scrutinize Professional or HR Services.

Financial Services companies are less likely than average to scrutinize Direct Materials (13% v. 24%) and Professional or HR Services (20% v. 30%).

Calling out the responses by industry sector that differ from the national aggregateabout optimization tactics, savings reallocation and tightened categories.

INDUSTRY ANALYSIS SUMMARY

Optimization Tactics Savings Reallocation Tightened Categories

HIGH TECH AND SAAS more likely than average (83% v. 49%) to turn to contract renegotiation

MANUFACTURING more likely than average (56% v. 34%) to delay project expen-ditures

more likely than average (67% v. 43%) to scrutinize facility expenditures, and office equipment and expenditures (67% v. 40%)

RETAIL more likely than average to scrutinize purchase order crea-tion and approval (50% v. 26%) and less likely (17% v. 45%) to consolidate vendors

more likely than average to scrutinize IT (42% v. 25%) and less likely to scrutinize travel (17% v. 60%)

TRANSPORTATION AND LOGISTICS

more likely than average (67% v. 16%) to renew contracts ear-ly, and less likely (11% v. 34%) to delay project expenditures

less likely to redirect savings to other departments (33%)

EDUCATION more likely than average (67% v. 34%) to delay project expen-ditures and less likely (17% v. 49%) to renegotiate contracts

HEALTH CARE AND LIFE SCIENCES

more likely than average to redirect savings to other depart-ments (89% v. 48%)

more likely than average (56% v. 30%) to scrutinize Profes-sional or HR Services

FINANCIAL SERVICES less likely to redirect savings to other departments (37%) and more likely than average to invest in longer term and expan-sion projects (80% v. 66%)

less likely than average to scrutinize Direct Materials (13% v. 24%) and Professional or HR Services (20% v. 30%)

PROFESSIONAL AND BUSINESS SERVICES

more likely than average to rein-vest within department budgets (83% v. 52%)

INDUSTRY ANALYSIS

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21

PARTICIPANTS

BY INDUSTRY

BY REGION

ABOUT THE PARTICIPANTS

Financial Services (Banking & Insurance)

Retail

Manufacturing

Health Care & Life Sciences

29%

13%

12%

9%

8%

Professional & Business Services

Transpor tation & Logistics

High Tech or SaaS

Education

Telecom

Energ y, Oil & Gas

Construction

6%

6%

6%

5%

3%

2%

2%

MOUNTAIN/PACIFIC

SOUTH

NORTH CENTRAL NORTHEAST

24%

21%

27%

27%

Other

Manager 46%

25%

20%

31%

24%

Operations and Other 20%

Finance 48%

Procurement 32%

Other 29%

C- Level 6%

VP, Director 19%

22

PARTICIPANTS

BY REVENUE

BY FUNCTION JOB RANK

$5B+

$1B

- $5B

$250

M -

$1B

$0 -$

250M

About the survey

Suplari, the first AI-powered Enterprise Insights System to finance and procurement, is the sponsor of this study "Plans & Tactics to Recession-Proof the Enterprise: A Survey of Procurement & Finance Professionals". The survey asked respondents their opinions about the likelihood of an upcoming recession. It also asked about the ways in which companies cope with economic slowdowns, including strategic responses and the expenditure categories that tend to receive the greatest scrutiny.

The survey was fielded April 25 to May 7, 2019 and has 104 responses. The average sampling error for a dataset this size is +/- 6.5% for the 80%/20% observation and 90% confidence. The data was analyzed and the report drafted by Roth Consulting LLC, a Seattle company that specializes in marketing research and strategic marketing. About Suplari

Suplari provides an AI-powered Enterprise Insights System, indispensable to finance and procurement. The system makes financial sense of enterprise spend, supplier and contracts data, so they gain control and optimize margins, cost, risk and ROI.

CFOs, COOs, CPOs and business leaders alike rely on Suplari to gain better spend visibility and operational agility in order to optimize costs, assure compliance and reduce both risk and fraud. People using Suplari are delighted with their modern and fluid user experience, advanced analytics, and AI-assisted insights algorithms to track budgets, consolidate vendors, aggregate demand, negotiate contracts and manage supplier performance.

Customers from large Fortune 500 to mid-size enterprises have worked with our dedicated success team to get up and running quickly – from connecting their fragmented data to capturing cost savings. With Suplari, category managers, buyers, auditors, controllers, financial analysts and anyone with budget responsibility become catalysts of value creation in the spend-accountable enterprise.

Learn more about Suplari at www.suplari.com.

Media inquiries

Media contact: Juliet Louw, jlouw@suplari.comResearch contact: Alberto Sutton, www.linkedin.com/in/albertosutton/

We hope you find this report valuable and invite you to find other related resources at www.suplari.com/recessionsurvey. You can join the conversation and share your comments at our LinkedIn company page.

ACKNOWLEDGEMENTS

ACKNOWLEDGEMENTS

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The information contained in this publication has been obtained from survey responses provided by business professionals. Data in charts may not sum to 100% due to rounding or might have been truncated to indeed total 100%. The analysis and opinions expressed herein are those of Suplari, Inc. and independent third-party contributors and sources, and are subject to change based on market or other conditions. The content is intended for informational purposes only. While the information is deemed reliable, accuracy and completeness are not guaranteed and is provided on an as is basis. Application of the recommendations set out will depend upon particular circumstances involved. Suplari, Inc. would be pleased to further advise readers on how to apply the principles set out in this publication to their specific circumstances. Suplari, Inc. accepts no duty of care or liability for any loss occasioned to any person acting or refraining from action as a result of any material in this publication. For any summaries, social sharing, reprints and images that you may wish to disseminate, we ask that you include appropriate attribution and linkage to Suplari, Inc.

©2019 Suplari, INC. ALL RIGHTS RESERVED.

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