No matter how efficient a company is at managing its supply chain, it still must effectively manage its indirect spend, which starts with increasing visibility on this area. Just because office supplies, janitorial services, and landscaping don’t directly influence the production of your product or service doesn’t mean the proper management of those suppliers can be ignored.
As procurement executives have realized, better management of indirect spend categories can have a significant impact on overall savings and ultimately help the bottom line. The days of ignoring indirect spend are over. But it’s more than just reducing costs: better visibility of categories that fall within your indirect spend can help improve your procurement processes. Here are four reasons why it’s necessary to bring indirect spend into the spotlight.
Ensures more compliancy
Following guidelines of any kind can be a struggle. But for large organizations who need to follow internal standards, federal laws and regulations, and ethical practices, maintaining compliance is especially challenging. By thrusting indirect spend categories into the spotlight, it forces organizations to increase their capacity to comply. And better compliance in procurement means a smoother, well-managed department.
helps Mitigate Risk
Reducing risk should always be a priority for companies. Lower risk means a lower chance of disruption to your organization. A lot of companies end up focusing too much on the risks involved with their direct spend suppliers. But there are also risks involved with suppliers within your indirect spend categories as well, and if left unattended, they could eventually end up posing real problems for your organization.
Improves Supplier Quality
Like anything in life, if you’re not proactive about something, the quality of it will likely decrease over time. If you’re not focused on managing a supplier, regardless of category, you’re leaving room for a decrease in the quality of that supplier. It can result from a variety of things, including miscommunication or changes in procedures on either your end or the suppliers. That said, keeping indirect spend more top of mind can improve quality among the various suppliers within your indirect spend.
In today’s competitive environment, companies need to move with speed. With rapid changes in technology, demand, regulations and competition, a slow-moving organization is bound to be left behind. By harnessing and keeping indirect spend under control, you put your company in a much better position to respond quickly and with the right decisions.