The Spend Management Category

Group Purchasing Organizations: Supplier Perspectives and the Evolving GPO Landscape [PRO]

Joining a GPO is like getting a Costco membership. You know you’re not going to get ripped off, so you probably won’t put much thought into joining. But therein lies the rub for GPO members. Like Costco, a GPO is a one-size-fits-all marketplace where you may overbuy when you get there or underbuy by not getting there at all.

In an increasingly Amazon-dominated world, however, this model is not the only available option.Today, the assortment and pricing of items available to consumers are tuned to the user and monetized most efficiently by intermediaries that can source better and optimize for lowest total landed costs better than individual buyers. Procurement organizations are now looking to bring this experience to the complex world of B2B purchasing. And where GPOs fit into this more sophisticated equation is not a simple answer (many are still trying to figure it out themselves). 

But that doesn’t mean GPOs will go the way of the 1980s big box retailer. Instead, GPOs will have to take on a role beyond the race to the lowest price. This multipart Spend Matters PRO series explains what motivates GPOs and helps procurement organizations best decide when and how to engage them. In this second installment (see our initial GPO introduction), we explore GPOs from a supplier perspective and offer recommendations for vendors working through GPOs to make these relationships more successful. We also explore how GPO options and capabilities are evolving and segment the GPO market by model and type and provide case example looks at different GPO business models. These include vertical/industry independent, member-owned, horizontal, affinity, category-specific and procurement technology led GPO models. 

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The Perfect Storm for NHS Procurement

As one of the top five largest employers in the world and an average annual expenditure of £130 billion, the National Health Service (NHS) and how it spends its budget is a widely debated topic. Moreover, harsh restrictions on the public purse mean that healthcare procurement professionals are tasked with providing the best value for every pound spent while still protecting the quality of frontline care. And while we often see pressure on resources and cost of care making the media headlines, procurement professionals in this sector face a host of other challenges too.

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Beroe LiVE Poll: Spend Analysis Helps Trim Costs up to 5%

A procurement organization’s spend data usually resides in various databases and spreadsheets, often making it difficult to collate them into one coherent form for reporting purposes. However, procurement organizations can reap enormous benefits by bringing in much needed visibility into spend patterns. The importance of spend analytics has not gone unnoticed: 38% of procurement leaders had rated spend analysis as the most critical area to receive investment, according to Deloitte's 2016 Global CPO Survey.

An Introduction to Group Purchasing Organizations (GPOs) [PRO]

purchasing

Group purchasing organizations (GPOs) are not a new idea. Agricultural cooperatives aggregated the buying power of farmers hundreds of years ago. That said, GPOs have evolved quite a bit, and the infusion of new digital capabilities is taking that evolution to an even higher level. This evolution also means that procurement organizations must go in “eyes wide open” to best utilize this important tool in the procurement tool belt.

Not all GPOs (or GPO models) are the same. Understanding the differences will make you a more educated, and thus likely more successful, buyer. Therefore, we’ve decided to delve a little deeper into this obscure sector of the procurement provider market and shed some light on how to best extract value from it.

This multipart Spend Matters PRO brief is designed to demystify GPOs and put procurement organizations on the same information playing field as the GPOs attempting to sign them up, expand their utilization of contracts and sell additional services. Within this series, we will explore GPOs by type, as there are several business models in play, and by industry segment, as GPOs are heavily embedded in certain markets and are little more than a supply option in others.

This first installment in our GPO coverage:

  • Defines what GPOs are (and are not)
  • Explains how GPOs operate
  • Explores GPO “spend coverage and fit”
  • Analyze the GPO market segments and how to engage them
  • Offers tips and tricks for engaging GPOs based on their own constraints/models
  • Provides both basic and advanced takeaways for procurement organizations that are thinking through GPOs as an alternative supply option
  • Offers a checklist of activities to consider when sourcing GPOs

All We Are “Saved” — Give Purchasing Consortia (Including GPOs) a Chance [Plus+]

Purchasing consortia and group purchasing organization (GPO) models have been accused of being fads in the past. But there are reasons they could more than go mainstream as a common procurement lever across industries, working outside of just healthcare environments, where they have thrived in the past. Spend Matters research suggests that there certainly are a number of underlying factors that make the consortia and GPO models more attractive than before (even if some suppliers, such as the airlines, will never play ball in working with these intermediaries). Indeed, several GPO and consortia providers not focused on one particular industry have a lot to offer to procurement organizations looking to better manage cost and quality for certain categories of spend.

In this Spend Matters Plus analysis, we will explore the reason behind the current and rising interest in these models and the benefits they can bring to procurement in such categories as IT spend (e.g., hardware, software, etc.), human resources (e.g., contingent staffing and MSP programs), office supplies, employee benefits (e.g., retirement/pension, pharmacy benefits, etc.), facilities and other professional and services categories (e.g., operations consulting, energy management, etc.), not to mention some areas of direct spend as well (e.g., metals). First up: exploring the different GPO benefits for both less mature and more mature procurement organizations.

From Process Efficiency to Savings: 12 KPIs for Business Spend Management

spend visibility

Coupa recently released its 2018 benchmark report on measuring business spend management success by means of 12 key performance indicators (KPIs). The 12 KPIs, which cover process efficiency, digitization, compliance and savings, were based on anonymized data from the top quintile of Coupa customers’ performance in each KPI. In this post, we will look in more depth at each of the four categories

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Why Marketing Contributes to a Terrible Spend Culture

marketing spend

Notwithstanding the obvious differences in personality, the mutual look of incomprehension when the CMO and CFO try to explain to each other what they actually do, marketing and finance have never been particularly pally. It’s not just the stark difference in their background, it’s not even the daunting task of proving ROI on an ingenious marketing campaign to a number-crunching CFO, or the danger in committing company funds to some radical idea based on a marketer’s sudden, Steve Jobsian flash of insight into the minds of customers. The things that can cause an ugly spat between marketing and finance are actually much more prosaic.

4 Ways Law Firms Can Evolve Their Procurement Strategies Beyond Savings

forced labor

Spend Matters welcomes this guest post from Clay Fox, senior director at HBR Consulting.

New technology and regulations, increased client scrutiny into risk management protocols and interest in supplier diversity programs, along with expectations around improving law firm operations and internal controls, have all spurred recent changes in law firms’ procurement functions, making one thing clear: procurement’s value can no longer be judged by savings alone. As we navigate the early months of 2018, law firms looking to set themselves apart in the market need to think well beyond the status quo. By focusing on four key areas in 2018, procurement can prove that its value extends far beyond savings.

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Why Mid-Size Companies Need On-Demand Solutions to Conquer Tail Spend

Procurement has firmly entered the tail spend era, and with necessary tools now available to tackle this persistent purchasing problem, supply organizations are finally consolidating costs, cracking down on unauthorized spend and clawing back lost time to deliver real value to their businesses. At least, that’s what the picture is starting to look like at large manufacturers and corporates. Within the typical mid-size firm, however, addressing tail spend still eludes many procurement organizations. The issue is less a challenge of capability than finding a solution that fits their unique business needs.

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Private Equity Procurement Optimization: Spend Visibility is Foundational for Accelerated EBITDA Improvement

Procurement optimization has become one of the most important EBITDA improvement levers for private equity firms and their operating partners. With investment valuations on the rise, private equity firms are increasingly relying on implementing operational efficiencies to quickly accelerate savings and maximize profits — and focusing in on procurement is becoming the “go-to” strategy. In addition, extended hold times of portfolio companies and lower management fees due to less capital being deployed on a regular basis has led to PE firms to ask their operating partners to do more with less.

Unlocking Deeper Value in the Procurement and Finance Relationship (Part 3): The Top 10 Impact Areas for Procurement’s Involvement in FP&A [Plus+]

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In the second installment of this series, we discussed procurement’s role in helping finance professionals and budget owners use spend data to improve the FP&A process and general business planning. Now in Part 3, we get specific about how to tackle this beast with some specific recommendations that we’ve seen proven out at both advanced firms and at firms that are further back in the bell curve of procurement maturity.

Unlocking Deeper Value in the Procurement and Finance Relationship (Part 2): Spend Planning and Analysis [Plus+]

e-invoicing

In the first installment of this series, we discussed ways to align procurement with the finance function, starting with financial accounting and then moving into cost accounting. Although cost accounting has one foot in the financial accounting world in terms of tracking costs and having them flow to the general ledger (GL), the more important side of cost accounting is its part in managerial accounting and total cost management.

Managerial accounting is about analyzing financials to make good business decisions. It includes analyzing historical costs and spending, but only in the context of improving future spending and reduce total economic costs. One aspect of economic costs is opportunity costs, and procurement must work hard with finance to understand the procurement ROI that comes from strong management of external spending led by the procurement organization. This ROI is measured in triple digits but must be demonstrated with hard numbers.

More importantly, however, procurement’s ability to partner with finance to better influence future spending is the most practical way to influence financial and business results. This comes from procurement aligning well with finance within the financial planning and analysis (FP&A) processes that occur in finance. Hopefully, FP&A is more than just basic budgeting at your organization. Done well, it provides the critical linkage to not only financial planning but also strategic and operational planning that drive success for budget owners, broader stakeholders and shareholders.

Given the importance of FP&A, we’re going to focus on this collaboration area and how to apply it to spend management, which you can think of as “spend planning and analysis” before the spend actually occurs, as opposed to traditional “spent analysis” of spend that already happened. This focus upstream is fundamentally about transformation and changing procurement’s role in the planning and budgeting process. Luckily, this area creates much higher quality of spend influence, which drives proven levels of spend savings.