Tempted to make cost reductions your first target in today’s struggling economy? Might want to re-think that strategy, suggests an all-star panel of financial and procurement experts pulled together by Emptoris, a leader in innovative supply and contract management software solutions.

Here’s why: The “quick and dirty” approach rarely stands the test of time. Instead, decisions that are well-thought out — with a clear eye on the future — are the ones that pay off in the long haul.

There are three points you’ll want to keep in mind that’ll help your operation better survive turbulent economic times:

1. Where is all the money going? A lot of companies don’t always have a clear handle on just who is spending money, what it’s going toward, and how much is being spent. That’s because buying responsibilities are spread through several departments. If it’s not possible to consolidate these responsibilities, try creating a system of spend visibility reports. Designate a central site where everyone submits what they’re buying and how much it cost, so one person will maintain continuity and dole out necessary info.  This also should uncover any overlaps and inconsistencies.

2. Are they sticking to our contracts? Speaking of inconsistencies, now’s a great time to review your contracts with vendors and suppliers. Are you getting the quantity discounts you agreed on? Are suppliers living up to their terms? Is it time to open any of these contracts to re-negotiation?

3. Is that really the best way to reduce costs? Remember the old line “Penny wise, dollar foolish.”? That can apply to many of the decisions that might be made in haste: They look good on paper now and save a couple of bucks, but you end up worse off in the long run. What if there’s pressure on you to switch to a vendor who has lower prices? Are you going to get the same kind of service and cooperation that you have with your current vendor? That’s why it pays to carefully consider any serious change in the status quo.

Tags: contract, cost reduction, visibility