By Susan Avery
When it comes to managing the company’s indirect spend, procurement leaders appear to have settled on an operating model—centralized or center-led. Yet some old challenges continue to plague them, including maverick buying.
That’s according to new research presented in a white paper published by ProcureCon Indirect West, Gauging Indirect Spend Management, GPO Adoption, and Best Practice in 2016. For it, ProcureCon surveyed its procurement audience. Eighty-one executives responded.
Other key findings include:
The indirect spend consists of those categories that help keep an operation up and running. Participants in the research say they purchase these indirect categories: IT and telecom, marketing and professional services, facility management and maintenance, shipping, travel, printing and office supplies.
Questioning procurement professionals on the operating model they’ve decided upon to manage sourcing for their organizations finds 38% have put in place a team that’s fully centralized. Another 36% work in center-led procurement operations. In such a model, procurement creates strategy for the business, but leaves execution to regional groups. Twenty-two percent use a decentralized procurement model to source indirect goods and services.
“We are always aiming for a more calibrated and strategic approach to sourcing,” says Tim Dougherty, Director of Procurement at Americas, DP DHL. “We want to leverage as much as we can back to the market so that we can drive the best price based on volumes, and establish a strategic level of partnership with our selected vendors.” Dougherty contributed analysis to the white paper.
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Indirect procurement’s big challenge, according to the ProcureCon research, is maverick purchasing. Forty-one percent of survey participants say this issue is among their biggest. Another 15% say they don’t have enough time and resources to manage suppliers and 14% cite poor purchasing reporting as a challenge.
The white paper also looks at: contract management and the allocation of time to indirect spending; the need for analytics capabilities and benchmarking to support procurement’s growing role; and using GPOs to meet savings requirements.
Nearly half (49%) of research participants benchmark indirect procurement by reviewing year-over-year company spend within categories. Others benchmark by using data supplied by vendors or outside sources to determine category spending vs. industry peers or spot checking spending in some or all categories vs. published pricing information.
Twenty-eight percent use a GPO to source indirect goods and services. Another 14% say they are evaluating use of group purchasing operations.
The white paper provides recommendations for procurement going forward.
Innovatix, a group purchasing organization, sponsored the white paper.
ProcureCon Indirect East takes place March 6-8, 2017 in Orlando. At the event, ProcureCon and My Purchasing Center present the 2017 Excellence in Purchasing Indirect Category (EPIC) Awards.
My Purchasing Center is a ProcureCon Indirect West media partner.
Download the white paper, Gauging Indirect Spend Management, GPO Adoption, and Best Practice in 2016
Also see these articles at My Purchasing Center:
Susan Avery is Editor-in-Chief at My Purchasing Center. She writes articles, blogs and white papers and manages and creates other content for the online procurement and supply management publication. She produces and moderates roundtable discussions, podcasts, webcasts and video interviews. Susan has 30 years experience covering procurement and supply management for Purchasing magazine and Purchasing.com.
George E. Krauter
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