Prime Advantage Blog

The Hottest Issue in Indirect Procurement is...

Mike McDonald on Jun 25, 2015 1:42:22 PM

chessIn a recent survey conducted by Supply Management and Expense Reduction Analysts, maverick spending by non-procurement employees was cited as the biggest challenge relating to indirect procurement. While this is an issue that's been percolating for several years, industry leaders are split on how best to wrestle this alligator.

The survey cites two main solutions; training non-procurement employees on procurement practices, and consolidating the number of suppliers the entire organization utilizes. Both, in theory, sound right. And both in practice are a lot of work. This is part of the reason why this issue has become such a hot button.

The advantages of managing indirect spends are abundant. With so many categories, the opportunity for cost reduction is there, but it goes beyond just cost reduction. The desired result in managing indirect spend is to realize the same advantages a firm does by managing direct spend -- which is the highest level of quality, service, delivery and cost containment, as well as partnering with suppliers that align with your strategic vision.

While this survey cites two options to address the issue, joining a buying group is also a solution. Many companies join Prime Advantage to accomplish just that; the benefits of managed indirect spend, but without having to do all the work themselves. Entrance audits, ongoing supplier evaluations, continuous feedback loops, limited competition and existing savings programs ensure that Members have access to top performing Suppliers in many direct and indirect spend categories. In essence, they’re addressing the issue by outsourcing it to an existing solution, which for some companies, makes more sense than going it alone. 

berner-side 

Topics: Procurement

Mike McDonald

Posted by Mike McDonald

Mike is the Executive Vice President of Business Development for Prime Advantage, a Chicago based Group Purchasing Organization for mid-market manufacturers. Responsibilities include managing business development, marketing, and the GPO's Healthcare Cost Containment program. He’s been a featured speaker, published author, and recognized award winner within the supply chain community.

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