During our joint keynote this morning, SIG's Dawn Evans presented a number of observations on trends that her organization is observing in indirect spending programs inside companies. Among these, Dawn suggests, "many companies are turning to indirect cost savings initiatives to compensate for declining revenues and take advantage of their buying power." It's Spend Matters observation that more recently during the recovery, indirect spend has been a continued beacon of opportunity (except for MRO items such as solvents and industrial lubricants, closely tied to oil and related raw material markets) amidst volatile and often rising prices for direct spend. We also agree with Dawn and SIG that taking advantage of buying power in both inter- and intra-company demand aggregation is helping fuel not only savings, but better supplier relationship management and realized savings and quality levels across many indirect categories, including services spend areas.
Dawn also noted that the "recession and slow recovery has forced suppliers to offer more attractive price reductions, rebates and incentives." In recent quarters, many indirect suppliers (including distributors and wholesalers) have gotten beyond offering these incentives on a blanket basis, and have become much smarter about how they've segmented their customer base into different tiers.
Being a preferred supplier can undoubtedly come from pooling and rationalizing spend, but there's more to it than this. For example, matching requirements and spend to areas where suppliers can differentiate themselves through value-added services (e.g., VMI, JIT) is one way. But becoming a preferred customer can also mean working with suppliers to ensure their selection for a given SKU (or a basket), resulting in an acceptable margin that can be further increased through joint cost take out programs where buying and supplier organizations share in the benefit.
Where does Dawn see this going for procurement? For one, she believes that new technologies and social constructs will play a role, including "taking the best from Web 2.0 to drive adoption" and "leveraging the power of the crowd to save even more." Moreover, she suggests a "single platform for controlling all indirect spend" is not out of the realm of possibilities as a means of driving to increasing savings and compliance goals. Yet based on our experience, there are few vendors capable of offering anything approaching this today, despite the popular marketing claims and refrains the technology firms are so quick to tout.
Stay tuned as our coverage of the Beeline customer conference continues!