The Smarter Procurement Mindset for 2023: Moving from Tactical to Strategic Indirect Spend
December 13, 2022 9:00:00 AM PST December 13, 2022 9:00:00 AM PSTth, December 13, 2022 9:00:00 AM PST
Indirect spend, while much overlooked, is often a prime area for cost savings — if it is managed correctly.
In general, indirect spending refers to goods or services such as travel expenses, office supplies, technology, IT support, utilities, marketing, or other expenses that are necessary for a company’s day-to-day operations. If captured appropriately, indirect spend savings could add up to 20% to 40% overall. This percentage is even more significant when you consider that indirect spending can comprise 80% of expenditures across an organization.
With an area of impact that large, it is surprising that many of today’s procurement professionals and C-Suite operators do not give indirect spend the close attention it needs. Or they examine it only at a microcosmic level rather than in a “big picture” way. One of the most productive ways to change the face of your indirect procurement efforts is to move from a tactical to a strategic indirect spend formula. Switching your focus from individual procurement tasks to a broader procurement plan is a smart way to maximize savings, reduce risks, and ensure a better return on investment for your indirect spending dollars.
Switching Tactics to Encourage a More Strategic Indirect Spend
A strategy is an entire plan that is mapped out with the idea of getting your organization to a certain long-term goal. Tactics, on the other hand, are the individual actions that should take you there. What many procurement executives miss is that a strong, well-developed strategy must necessarily come before the tactics that support it. Strategic indirect spending is about collaboration and a focus on the future rather than the day-to-day activities of purchasing such as placing and tracking orders. To change your indirect spend focus from tactical to strategic, consider the following:
Use Strategic Sourcing
You want to develop a long-term approach to your acquisition needs, and that includes fostering a collaborative relationship with your suppliers. When you create a closed loop that links your supplier and customer you can achieve improvements not only in the area of cost savings, but also in quality and delivery. To source strategically, you must analyze your current spending trends, conduct market research, and evaluate suppliers throughout the relationship lifecycle. Tactical sourcing, on the other hand, is more reactionary and does not necessarily focus on the company’s broader requirements. Instead, it is conducted using a typical “quote and order” process that focuses on short-term needs. By its very nature, this tactical approach reduces your organization's ability to gain cost control and savings through volume ordering and order consolidation.
Track Indirect Spend Data
As mentioned above, to develop a long-term strategy for your organization, you must analyze data to uncover opportunities to optimize resources and lower costs. But to gain this kind of visibility, you must have resources that can help you track costs across divergent sources. Technologies such as print management software can help you create the data you need for targeted spend analysis and help identify waste and opportunities for optimization. This, in turn, can lead to smarter indirect purchasing and better return on investment (ROI) across departments.
Get Everyone on Board
You may have successfully deployed technology that helps you analyze the data to control costs and perhaps identified ways to strategically source your supplies, but until your entire organization is on board with your strategy, you won’t be able to have complete control over indirect spending. You must teach everyone in your organization — from C-Suite to the front desk — to take advantage of tracking technologies and other directives to keep your indirect spending strategy on target. For example, anyone involved in purchasing decisions should have access to analytics that can reveal whether consolidating supply purchasing with a single vendor will be advantageous.
QIS — Your Strategic Partner for Imaging Supplies
By now you understand the importance of a strong, proactive strategy when it comes to indirect spending. By outlining, defining, and targeting your indirect spending goals your organization can achieve savings of up to 40% over time. And one of the integral parts of a smart indirect spending strategy is a strong partnership with a supplier that can support and optimize your strategic goals.
At Quality Imaging Solutions, we not only provide all your print and imaging supply needs, but we can help you assess your current print infrastructure and help you optimize your fleet and work processes through leading-edge technology. Our team is adept at working with your internal stakeholders – from procurement professionals to facilities teams and IT – to facilitate cost savings through value added tools that help you gain real insight into spending trends.
Contact us today and let us help you approach your indirect spending strategically for better bottom-line results.