Indirect procurement costs are often considered insignificant. However, recent studies have found that indirect spend can account for up to 50% of a company’s purchases and manufacturers specifically can spend 20% or more of their total revenue on indirect expenditures.
The next great impact area for procurement organizations is in accessing hidden, unexploited areas of indirect spend. However, to maximize the savings that automated eProcurement solutions can provide, procurement and purchasing leaders need to rethink and reshape the traditional approach to B2B e-commerce. Some approaches that seem counter-intuitive can and should be leveraged to drive unprecedented savings and value.
There are significant indirect procurement challenges, including:
- Thousands of suppliers to negotiate/manage
- Reduced negotiating power in tail spend
- B2B purchasing behavior is influenced by B2C experience
- Millennials are twice as likely to pursue competitive marketplace shopping
- Prices and items change dynamically all the time
The eProcurement purchasing process for an end user is usually clunky and time-consuming, leading to poor user adoption of the procurement system. With punchout (web) catalogs, users must search one at a time to find the items they are seeking and are exposed to many products not under contract or approved. Employees who are forced to deal with exhausting product searches and outdated information are more likely to get discouraged with the purchasing process.
Thus, user commodity purchases are often made from the same vendors (without comparing alternative pricing options); or via “rogue spending,” which are purchases made outside of the ERP or eProcurement system and nullify the benefits of the pre-negotiated discount pricing. Both scenarios result in a significant loss of savings.
Real-time technology makes it possible to rethink the traditional indirect procurement business model and provide users with true comparison shopping within corporate purchasing processes alongside procurement guidance and visibility. Procurement and financial leaders need to evolve the way they think about B2B e-commerce, supplier relationship management, procurement savings and ROI. It is time to realize the indispensable value that real-time data delivers to their organizations and to understand that procurement needs to move at the speed of now.
Instead of constraining users to purchase only from one or two large suppliers with stale, pre-negotiated pricing, procurement and financial leaders can empower them to become champions for savings at their organizations, by providing visibility to all prices in real time, allowing them to choose the lower-priced options at any specific moment of purchase. Studies indicate that these previously untapped savings can be significant.
To learn more, download Aquiire’s white paper Reshaping Traditional eProcurement To Achieve Extraordinary Savings on Indirect Spend.
This white paper explores some of the challenges with the traditional eProcurement model and ways leaders can achieve significant untapped savings on indirect spend by reshaping B2B e-commerce and supplier management strategies. The paper provides data-driven case studies with results we hope you will find interesting.
Click on the image below to access the white paper. Contact info@Aquiire.com if you would like more information or to learn more about our complementary savings analysis for qualified organizations.