Master the Art of Maximizing Indirect Spending Savings

By Rick Bender

November 17, 2016 at 4:51 AM

When it comes to spending money on supplies, there are a few non-negotiables. However, the areas where buyers can negotiate are far more numerous. And, while it may feel like negotiating prices for paper and other office supplies is spending dollars in time to save a dime, the truth is that you may be stepping over those dollars by missing out on negotiating. According to a CAPS research study, indirect spending accounts for an average of 50% of business costs. of Here’s how it can save more money than you realize.

What is Indirect Spending?

When it comes to business costs, there are two types of expenses: direct and indirect. Direct spending applies to supplies that go directly to manufacture products, such as coffee beans or other raw materials. Indirect spending is just about everything else that isn’t going into a product. Some examples include office supplies, computers, equipment and furniture. The difference between indirect and direct spending when it comes to your business is that indirect costs don’t have an effect on what you are producing. That means you can treat it like a commodity and do cost analysis.

How Can You Save with Indirect Spending?

With indirect spending, the buyer is in control. With a supply such as paper, for instance, competition is fierce. If you are unhappy with your supplier, it isn’t difficult to find someone new, and there is a field of different vendors and prices. Additionally, many suppliers use the same manufacturer, so your quality will be consistent no matter who you are using.

However, often these expenses are the types that get put on auto-pilot. Not a lot of thought goes into choosing a paper or janitorial supplier, and it’s treated like a one and done deal. However, some of these costs equal a significant amount of your business and should not be taken for granted. Be proactive in negotiating your prices and constantly evaluate your situation.

Savings Are Not Limited to Office Supplies

Don’t only bring out the big guns for your paper and pens. While these are a significant volume of most business supply purchases, there are big savings to be had in other areas. CenterPoint Group offers benchmarking of certain indirect costs with no obligation for items you may not have considered. Some of these include janitorial and facilities supplies, telecom services such as cell phones and plans, car rentals, and even gasoline and diesel fuel.

No matter what your business is, there is likely room in your indirect spending budget to get a better deal. Whether you negotiate yourself or utilize a GPO, you’ll want to spend some time going over the categories in your business.

 



Tags: purchasing MRO indirect Supply chain management Negotiation Prices Procurement Technology sourcing office supplies GPO group purchasing organization
Category: Blog Post

Rick Bender

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With more than 30 years of experience working with and providing excellent customer service to companies of all sizes, Rick Bender now is the Sales Director at CenterPoint Group. CenterPoint is a management consulting firm that specializes in reducing purchasing expenses of businesses in areas such as office supplies, janitorial supplies, breakroom/coffee, reducing cellular phone expense, fleet cards (gas and maintenance discounts) and car rental discounts.


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