Is Indirect Spend Killing Your Bottom Line and Your Strategic Sourcing Efforts?

Is Indirect Spend Killing Your Bottom Line and Your Strategic Sourcing Efforts?

For many mid-size companies, indirect spend is killing their bottom line and derailing their efforts to implement strategic sourcing.

Procurement professionals know there are many opportunities to reduce indirect operating expenses but there are some common barriers blocking their efforts including:

  • Lack of staff bandwidth
  • Limited internal experience purchasing scientific or technical items/services
  • Minimal useable spend data
  • Reliable benchmark data

Knowing that there are issues and opportunities but lacking the staff and time to drive change tops the list of frustrations for procurement professionals I speak with weekly.

When I am asked for a recommendation, I suggest hiring a third-party consultant.

Let me offer some thoughts to help you evaluate their services. They should:

  • Base their compensation on results achieved
  • Develop quality benchmark data that can be maintained internally
  • Create reporting that helps the executive team identify additional opportunities for savings
  • Drive spend down by leveraging buying power
  • Identify aggregation and substitution opportunities to further manage costs
  • Establish internal processes to minimize or eliminate rogue spend

This approach is not new but the way it can be done is.

This isn’t simply an exercise to pressure suppliers to reduce their costs. Strategic rethinking and process improvement are foundational elements.

Consultants that employ powerful analytical tools with category expertise can achieve exceptional results for you.

Here are some sample success stories to illustrate what is possible.

  • A consumer products manufacturer and distributor reduced labeling costs by $800,000 (52%) by replacing a long-standing supplier. The supplier had been in place for many years and delivered “great” service. This was accomplished with a targeted RFI/RFP process. The final price negotiation was facilitated by the benchmark data developed by the consultant. The company was also able to reduce inventory and the risk of obsolescence.
  • A national service company with almost 100 branches supporting thousands of field-based technicians was able to reduce annual telecom expenses by $450,000 (30%). The consultant’s ability to analyze rate structures and data usage gave the company powerful information to use in contract negotiations with the carriers.
  • A well-known retail chain was able to save over $700,000 on packaging costs even though they had used reverse auctions as a cost reduction strategy. Spec rationalization and consolidation combined with better payment terms and reduced lead times all contributed to the savings.

All these success stories started with a question.

How can we reduce indirect spend if we don’t have the time or resources for the project?

If you want to know more, please use the link below to set up a call. We should be able to determine in less than 30 minutes if this approach can work for you. If it is, we can discuss next steps so you can improve your bottom line substantially.

Ask better questions, make changes and 2019 will be your best year ever.

Action Step: If you are uncertain where to start the process of change, a procurement professional like myself can provide guidance and expertise to help your organization achieve the results you want.

If you want to go explore this topic in greater detail, please contact me. I invite you to request 30-minute discovery conversation. In my experience the next step will be apparent at the end of the call. I never assume that what I have to offer will be right for everyone, so don’t expect a sales pitch. You can reach me at (973) 718-7071 x875. The call will be forwarded to my mobile phone if I am not in my office which is pretty likely.

If you would like to know more ways to reduce costs without changing the way you do business, simply give me a call or send me an email with your contact information and the best time to reach you.

You Won’t Drift to Success©

Commit to taking the next step.

Until Next Time, I Wish You Great Success in Your Business and in Your Life

Mike Jeffries