The Current State of Indirect Procurement

This report captures strategy, practices and outcomes that have been experienced by Faculty Roundtable members in managing indirect spend areas. Realised value ranges from year one benefits of up to 50% reduction of annual costs through to year on year, sustained benefits representing multiple millions of cost savings. It recounts the valuable insights of the Roundtable members and distils the combined intelligence into a set of over-riding themes, tips and key success factors that the Roundtable members can utilise in Procurement strategies.

The Roundtable companies work across a broad spectrum of industries and markets.  The diversity of the business interests necessitates a difference in the specific indirect products and services acquired, and also the degree of importance the business assigns to indirect categories. Whilst the nature of the categories is inherently different from company to company, the nature of the key challenges is a unifying factor amongst all Roundtable members.  The research found that several common indirect spend categories have been actively managed by all Roundtable member companies. 

Success is perceived and recognised by Roundtable members in differing ways, but the ability to influence and create value from common areas suggests certain indirect categories provide a fertile development ground for Procurement. These categories represent the ‘low-hanging fruit’. Typical ‘hard’ benefits coming from the management of these areas include leveraged cost reductions, standardisation-led cost reductions, efficiencies and compliance benefits. ‘Soft’ benefits include the perception of Procurement as a leader in process efficiencies, a cost reduction specialist, change agent, enabler to the business and valued partner in clarifying trading relationships between operations and the supply base.

Beyond the ‘low-hanging fruit’, Procurement has scored wins in many other parts of the business, sometimes through strategy, mostly through tactical partnership and stakeholder engagement. Complex services such as creative marketing agencies and managed IT service providers, can amount to significant expenditure. These areas are often difficult for Procurement to influence, with subject matter experts or senior executives failing to recognise what value Procurement can offer. Making progress here demands a high level understanding of key business issues and the ability to generate confidence and trust in your abilities to support senior management.

A key finding of this report is that the limited available resources should be focused on the lowest hanging fruit and should be dedicated to conducting deep analysis, planning sessions, implementation, and management handover and monitoring. Data is another constraint for almost all organisations. Regardless of the systems developed for the direct goods and materials of the organisations, finding good quality data that gives intelligent information proves difficult. Equally, it is important to recognise that lack of data does not prevent advancement, and that results may take longer to achieve but those results are equally as compelling. The ability to provide a valued service to the organisation comes across as a vital success factor in tackling indirect category management.  Using simple, efficient ways to enable users to buy from Procurement, established suppliers can align company goals, internal stakeholders’ interests and the Procurement agenda

The full Current State of Indirect Procurement report generates a number of recommendations, including a suggested program plan along with sample benefits derived by The Faculty Roundtable companies. To request a full version of the report, please email The Faculty.