The value of indirect procurement

More than ever, indirect procurement offers strong potential for gains. Companies reluctant to buy-in may find themselves at a competitive disadvantage.

Indirect procurement, if done well, can produce big wins for organizations because it offers significant gains with relatively quick implementation. In all business sectors, indirect spend represents more than 20% of expenses. Therefore, a 10% savings is equivalent to a 2% margin. As more organizations have a significant volume of indirect services and goods in play, now is a critical time to implement a commercially assertive procurement plan.

Successful indirect procurement strategy creates meaningful transformation in the following categories:

• Services deliveries – IT SaaS and Development, Travel, Facility management, Insurance
• Intellectual services – Marketing and Advertising, Consulting, Legal, Training, Outsourcing
• Consumables – Utilities, Office supplies, Printing, PPE, Industrial supplies, Packaging
• Investments – Real estate , Infrastructure, IT equipment, Networks, Production equipment, Vehicle fleets

While indirect procurement methods have been implemented in the manufacturing and services sectors over the last 20 years, plans can fall short of achieving maximum potential for a few reasons. Budget issues, nominal purchasing leverage and peripheral understanding of departmental specializations can hinder return on investment. Many functional owners are reluctant to trust procurement to an outsider and, instead, carry out the entire process from start to finish.