The modern business environment is changing the way businesses execute their Mission Critical Functions. These pressures are not only economic in nature, but technological, political, competitive, and significantly Customer Requirements Driven. There is a seismic shift in the mindset of the modern customer from Triple Constraint (wanting products cheaper, better, faster) to quadruple constraint (wanting products cheaper, better, faster, and Environmentally Safe).

Proactive CFOs and CPOs are responding to these factors and shifts in a variety of ways, but with a common goal, aligning TOC (Total Cost of Ownership) with Strategic and Customer Requirements.

The internet with continues to be a force that drives visibility, accountability, and added pressure to companies regardless of their business sectors.

Strategic Spend Management enables companies to sustain fiscal viability, stakeholder and customer value. The following are methods industry leaders are employing to leverage Strategic Spend Management to maintain fiscal and operational health:

1.) Real-Time Spend Tracking, Dashboarding, and Visibility

This gives Procurement, Supply Chain, Financial and Executive Leaders real-time spend accountability relative to revenues. Some of these robust systems have pre-set Red Flagging Mechanisms to detect fraudulent patterns with shut down protocols. Business leaders can put in place early corrective action protocols to reduce the impact of negative spend trends.

2.) Proactive Sustainability and Eco-Friendly Mechanisms to reduce spend.

Many visionary leaders are homing in on their operational methodologies and are reducing activities that do not add value to their Supply Chains. They are using Lean Tactics to reduce unnecessary Transportation, Motion, Inventories, Over-Processing, Over-Production, Defects, and Scrap. This Non-Value-Added Waste constitutes up to 60% of the activities of a typical firm. They are responsible for significant resource (raw material and energy) over-usage and carbon emissions.

Up to 25% to 40% of expenses or 25 to 40 cents on the dollar go toward these waste elements!! Eliminating them as much as possible should be part of every procurement executive’s mandate.

3.) Adaptive Procurement and Artificial Intelligent Supply Chain Systems can add value to the role of Spend Management, by freeing up time spent by highly skilled procurement professionals on the menial task. Robust AI and Analytics Systems can provide procurement professionals with greater insights and decision-making capabilities around spend management.

4.) All processes in an organization are fair game for spend management and cost reduction. HR (health benefits and others), IT, Finance, Facilities and Utilities, Sanitation to name a few. Procurement departments can create greater value by looking internally as well as outwardly for opportunities.

5.) Collaboration with suppliers to succeed in spend management and value creation. Exchange expertise in technology, process management, risk management, and human capital assets. Leverage your suppliers’ Subject Matter Expertise and let them leverage yours! Design Co-Strategic Execution Plans.

Recommended Reading

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Categories: Procurement


Published On: November 27th, 2018Comments Off on Spend’s Role in Industry
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