As we continue our coverage of how to manage indirect spend more effectively, we come to 2 additional recommendations today, the first of which is to focus on all spend including items, services, projects, T&E and related areas. Part of the reason for this is that indirect spend has come a long way. Indeed, it is not just what we originally thought about putting through Ariba 15 years ago – i.e., paperclips and pencils.
Rather, indirect spend (if you factor in services) represents virtually all non-employee costs that fall into the SG&A category – and that’s a very long list. Addressing it requires solution support that spans SKUs/items, services, projects, T&E and related areas. Within T&E, travel remains a significant “under area” of procurement influence for many organizations and a good place for procurement to assist in the hunt for value.
Our next suggestion for targeting indirect spend centers on creating a win-win environment for all participants including suppliers. As we tell clients here, change your habits – don’t try to change the industry (or supply market). You won’t succeed in the latter. You need a win-win program by definition or else your project will suffer or fail.
Suppliers are truly key to the bigger picture – address their needs at the same time as internal stakeholders and users and you’ll win. This includes understanding all the structures of a given market dynamic. For example, sometimes it pays to have a supplier hold inventory for MRO, although sometimes it does not. It also requires thinking through how to become a customer of choice through suppliers (an ironic but often pragmatic approach here is to work through GPOs for certain categories – which suppliers often like, in fact).
(Cross-posted @ Spend Matters)