Indirect Spend Management

Organizations face a number of issues while dealing with their indirect spend management. Procurement teams in most product-based companies have traditionally focused on reducing their direct spend, and therefore lack the experience and the art of indirect spend management. Further, indirect spend management is spread across a broad spectrum of commodities, thereby increasing the supplier base and the complexities. Different companies face different challenges while dealing with indirect spend management. Requirements for certain indirect spend management categories such as office supplies may be similar across companies; however, they may vary drastically for other categories such as transportation and utilities.

More importantly, what makes indirect spend management difficult is that most companies lack the leverage in negotiations with their vendors due to low volumes and thus, lose out on discounts. In most companies, low volumes may also lead to non-contractual spending in certain product categories. In order to deal with all these challenges, companies need assistance from experts in indirect spend management.

In the current economic downturn, it is important for companies to control indirect spend management for efficiency. For companies in the services sector, it is even more critical, since optimizing their indirect spend may significantly affect their bottom lines.

Experts can conduct in-depth analysis of an organization’s indirect spend management, identify potential saving areas, patterns in requirement of indirect commodities, and shortcomings in the existing process, and provide customized solutions. In addition, they can help create channels for bulk buying and negotiate discounts which would otherwise not be offered to these organizations. They therefore equip companies with the leverage of volume. Further, they can help establish and standardize the purchasing process. This helps remove irregularities from the buying process, reduce overall cycle times, and keep a check on the non-contractual spend.