How to Save Millions in Indirect Spend

Managing your indirect spend can be challenging.  Accounting for between 15 and 20% of total spending for most companies, it’s a complex feat, indeed, taking in numerous categories of goods and services and a battalion of suppliers.  But you should know there are companies out there who are spending as much as 50% of total spending on indirect spend.

So, it’s important and it can get away from you in a hurry.

There are so many factors affecting the bottom line in this area of procurement, from rogue spending to a preponderance of inoperable or unused inventory.  But you can save millions in indirect spend if you play your cards (and your data) right.

Rogue spend effectively is a huge undertaking and one which your organization may not currently have the human resources required by such an effort.  Even if you have the resources, do they offer have the kind of experience you need for managing indirect spend?

Let’s get into some of the areas you can achieve superlative savings and efficiencies by getting your indirect spend under control and pulling its weight.

First steps

Reining in your indirect spend is all about the strategy you apply.  But to begin with, just shifting your focus to rogue spend costs can save you 25% right away.  And that’s only a first step.

An important key to optimizing your procurement process is automation in key areas like supplier payments, reorders and another administrative tasks.  This free hands for more important work. Also, when your payments are automated, you’re going to save on late fees.

Automation also provides you with excellent data which can be applied to refining your budget.

Transparency

Knowledge is power and the more you know about your indirect spend, the more power you have to streamline it.

Transparency means that the people up the chain know how funds are being spent and who’s spending them.  Who has access to the corporate credit card? When you don’t have that information, there’s no accountability because that could be more than one employee.

Making transparency a priority helps to eliminate rogue and fragmented spending, giving everyone a bird’s eye view of where the money’s going.

Find the big spenders

For this one, you’ll need well curated data which points you at decision makers or departments who are spending the most on indirect spend.

Here’s where incredible savings can be had.  Working with your big spenders to reduce their footprint wherever possible can change the whole game.

While you may not be able to cut costs on all indirect purchasing, finding the big spenders will inform you as to how money is being disbursed, which is an invitation to save.

Get there with CenterPoint Group

CenterPoint is a Group Purchasing Organization (GPO) and trusted procurement advisor, leveraging the power of an indirect collective spend of over $850 million.  Economies of scales aren’t the only thing that saves our members money, though.

At CenterPoint, we make managing indirect spend a seamless process that doesn’t strain your human resources (or even hurt a bit).

Contact us.

The post How to Save Millions in Indirect Spend appeared first on Centerpoint.

source http://centerpointgroup.com/how-to-save-millions-in-indirect-spend/

Finding the True Total Cost of Ownership (TCO) Within the MRO Category

Every product or system costs money.  But it’s about more than the product or system itself.  The Total Cost of Ownership (TCO) must consider a variety of factors, including the indirect costs associated with the product or system, including big ticket items like labor.

Finding the true Total Cost of Ownership (TCO) within the Maintenance, Repair and Operations (MRO) category begins at the very start of any purchasing process to help procurement discern the most cost-effective way forward in a competitive environment.

Maintenance, Repair and Operations (MRO)

Getting MRO indirect spend in line can be a very involved undertaking.  MRO is a complex category with many moving parts. It takes in everything on the manufacturing floor, including cleaning supplies.  The variety of goods found under this category is dizzying, making it an area of indirect spend which can be difficult to rein in.

But there’s more to tracking TCO in the MRO category than parts and products.  It’s also about understanding when items in the category are needed. While stopping production may be required to replace machinery and parts, that’s a costly endeavor and one which will disrupt the supply chain and delay delivery times.

A plethora of suppliers needed for a wide variety of items and the opacity around spending at the SKU level can make effective supplier management and strategic sourcing tough.

Adding even more complexity is the relationship between procurement and people on the shop floor.  There’s a disconnect which too often occurs as silos arise. There’s a need for flexibility in the questions of sourcing in this regard but the process needs to be uniformly managed, at the same time.

And then there’s the problem of any given operation’s various facilities communicating.  Different facilities source different suppliers for the same goods and services, creating an unruly beast of a supply chain.

Economies of scale which might create better opportunities for procurement are sidelined in siloed environments and that costs money.

Enter the beast wrangler

Discerning TCO in the MRO space is no mean feat, so calling on the services of a GPO with focused experience in wrangling the beast is the way forward.

Your supply chain needs must be understood in a process-driven way.  Getting a handle on your goals and figuring out where pain points in the process exist is how CenterPoint Group starts taming your MRO supply chain beast.

Data drives our solutions, but so does observation of processes on the shop floor and how staff there is interacting and collaborating with procurement.

Organizations like yours need a Group Purchasing Organization like ours.  We bring the resources, analytics and experience you need to tame that beast and get it working for you and reducing your TCO in the MRO category.

Working with the procurement professionals at CenterPoint, you’ll join a membership which has the power of numbers behind it and $850 million of indirect collective spend supporting it.  But cost savings are just the beginning of what we can do.

We bring the collar and leash for your MRO beast.

The post Finding the True Total Cost of Ownership (TCO) Within the MRO Category appeared first on Centerpoint.

source http://centerpointgroup.com/finding-the-true-total-cost-of-ownership-tco-within-the-mro-category/