Managing your indirect spend can be challenging. Accounting for between 15 and 20% of total spending for most companies, it’s a complex feat, indeed, taking in numerous categories of goods and services and a battalion of suppliers. But you should know there are companies out there who are spending as much as 50% of total spending on indirect spend.
So, it’s important and it can get away from you in a hurry.
There are so many factors affecting the bottom line in this area of procurement, from rogue spending to a preponderance of inoperable or unused inventory. But you can save millions in indirect spend if you play your cards (and your data) right.
Rogue spend effectively is a huge undertaking and one which your organization may not currently have the human resources required by such an effort. Even if you have the resources, do they offer have the kind of experience you need for managing indirect spend?
Let’s get into some of the areas you can achieve superlative savings and efficiencies by getting your indirect spend under control and pulling its weight.
Reining in your indirect spend is all about the strategy you apply. But to begin with, just shifting your focus to rogue spend costs can save you 25% right away. And that’s only a first step.
An important key to optimizing your procurement process is automation in key areas like supplier payments, reorders and another administrative tasks. This free hands for more important work. Also, when your payments are automated, you’re going to save on late fees.
Automation also provides you with excellent data which can be applied to refining your budget.
Knowledge is power and the more you know about your indirect spend, the more power you have to streamline it.
Transparency means that the people up the chain know how funds are being spent and who’s spending them. Who has access to the corporate credit card? When you don’t have that information, there’s no accountability because that could be more than one employee.
Making transparency a priority helps to eliminate rogue and fragmented spending, giving everyone a bird’s eye view of where the money’s going.
Find the big spenders
For this one, you’ll need well curated data which points you at decision makers or departments who are spending the most on indirect spend.
Here’s where incredible savings can be had. Working with your big spenders to reduce their footprint wherever possible can change the whole game.
While you may not be able to cut costs on all indirect purchasing, finding the big spenders will inform you as to how money is being disbursed, which is an invitation to save.
Get there with CenterPoint Group
CenterPoint is a Group Purchasing Organization (GPO) and trusted procurement advisor, leveraging the power of an indirect collective spend of over $850 million. Economies of scales aren’t the only thing that saves our members money, though.
At CenterPoint, we make managing indirect spend a seamless process that doesn’t strain your human resources (or even hurt a bit).
For further information on the benefits of membership, contact us here.