It is no news that companies in general are more focused on direct spend when it comes to talking about procurement. If they talk about procurement at all.
It comes as a surprise to EBG that so many procurement managers feel that their job is being neglected by the management team, them being much more focused on sales and marketing. Many procurement managers want to spend more time working on supplier strategies but find themselves doing administrative work. Some even say that when it comes to indirect procurement – those working with that were those who the company couldn’t place anywhere else.
As this great article presents, procurement and even indirect procurement holds its treasures not to be neglected. It also points out the difficulty in managing it since purchases spread across business units, different managers and almost endless amounts of people who are buying every now and then.
In our book, first companies need to take a look at the overall spend and see – is it worth looking over, it probably will be since making budgets and sticking to them is part of most companies forecasting efforts. And as the article declares, we are talking about hundreds of million of dollars in many companies.
The author, Robert Brust, also explaines that he brought procurement into the finance department.
In an ongoing survey 15% of the respondents (Swedish companies) declare that finance and procurement are fully aligned. 77,5% declare procurement and finance do not share lead boards and that their management team have no insight in the same.
Read this excellent article and let’s keep this discussion going!
From the article:
So, why haven’t more CFOs gotten directly involved in indirect procurement? The answer is two-fold. First, the purchasing of indirect goods and services in categories such as professional services, plant/facility services, utilities, MRO and travel is often managed at the department level, and finance executives rarely see the magnitude of overall spend that these categories represent. When looked at individually, the dollar amount of indirect spending in each department seems insignificant when compared to raw materials. But, when added together, they can account for hundreds of millions of dollars.