Category Intelligence (Indirect) Content

Spend Matters welcomes this guest post from Pradeep Chauhan, founder of OnContracting, an online directory of U.S. staffing agencies that helps jobseekers find temporary contract jobs.

Companies’ procurement of contract workers has in recent times become a flashpoint, sometimes tarnishing the pristine reputations of even the most reputable companies. A number of stories in the media have covered reports that some of the best companies are mistreating their contract workers. In damage control mode — and sometimes under pressure from their own employees — companies have responded reactively to these stories, updating their policies and buffing up their legal and audit teams but not after getting a black eye in public.

Why are businesses and contractors facing this now now? And what can companies do to manage it better? In this article, I’ll try answer both of those questions.

Indirect spend often gets overlooked by businesses because the outcomes from buying those goods and services are not the company’s core product, which relies on direct spend. But the potential for lost money and increased risk is so great that businesses must find a way to manage indirect spend.

“The broad reach of indirect spend, coupled with a lack of visibility creates risk, so the key to gaining visibility and managing this risk is to prioritize indirect spend management within an organization and start assessing indirect supplier performance in a formalized way,” said EcoVadis, a risk mitigation provider that offers business sustainability ratings and intelligence.

EcoVadis joined us for a Q&A to explore the next steps to figure out how to identify weak points, prioritize areas to defend against and create a plan for mitigating risks.

Because procurement is so often measured on cost savings as its primary KPI, another essential factor can be left by the wayside: risk. Especially when it comes to corporate social responsibility (CSR) and sustainability, risk remains hidden within indirect spend. To see how these dangers go unaddressed, here are three areas with examples of where organizations miss — but, with proper tools, can address — CSR and sustainability risks for indirect procurement.

Today’s technology enables fine-grained customization and personalization. When applied correctly, personalization can lead to a better customer experience and higher sales or engagement. If applied poorly, it can detract from the user experience, causing frustration and possibly missed sales. In this article, we’ll walk through some of the personalization that can be enabled when using Amazon Business, helping to make it easier to find the right products and better control rogue spending.

If you’re not familiar with it, Amazon Business makes it easy for business customers to find and buy from hundreds of thousands of sellers and helps sellers reach millions of registered business customers around the world. Similar to Amazon.com, buyers search for products from millions of available items. For businesses, personalization helps make the buying experience fast and efficient. From relevant search results to customized messaging, buyers can find the items they need, and know upfront if they are approved for company purchase.

The list of corporate social responsibility (CSR) and sustainability risks in the physical supply chain is long. When securing direct materials, procurement organizations must assess factors from restricted or hazardous substances to the kind of labor that went into raw material extraction and even political restrictions like sanctions on whether companies from certain countries are even allowed to do business with you. Because of these and numerous other potential issues, many companies have begun to focus on identifying and eliminating such risks from their supply chains with the help of third-party CSR data sources and risk-monitoring platforms. But while the value of assessing CSR risks for direct materials spend has gained prominence in recent years, the other side of the procurement coin, indirect spend, has not received nearly as much interest. That’s a shame — and a risk in itself.

For many procurement organizations, catalogs have become the default way to manage indirect spend. It’s easy to see why. Catalogs offer a simple way to manage recurring, low-value purchases. By grouping previously sourced categories and commonly requested items into a single interface, catalogs promise ease of use, efficiency and, of course, increased savings, especially through the reduction of maverick spend. In practice, however, catalogs often create as many new problems as they solve. To help you understand why, here are three reasons why catalogs can’t be trusted to manage low-value spend — and how you can go about protecting your organization.

If expensing that hotel stay or work lunch requires you to keep paper receipts, you are in good company. According to a report from PayStream Advisors, more than a third of employees file expenses either by mailing paper receipts to their AP department or through a combination of scanned receipts and spreadsheets. Nearly two-thirds, however, report that their organizations use a dedicated expense software tool. And as companies move along in their digital transformations, the trend in travel and expense (T&E) management is certainly away from manual systems.

We all have purchased something from online shopping portals. Can the same experience be replicated across procurement categories? Especially, when it comes to indirect services categories, which are hard to structure or commoditize? Organizations are constantly discovering ways to make the procurement process simpler, efficient and effective. There is a potential to bring a lot of contracts under managed spend instead of spot buying. Procurement managers usually spend a lot of time either negotiating for a better price or requesting services from suppliers. Catalog buying is being viewed as a solution to these procurement issues.

“Amazon, like any other organization, is not immune to the challenges you all are having with tail spend.” That was Jeff Oar, head of customer success, enterprise, at Amazon Business, speaking on a recent webinar held by Spend Matters (and co-hosted by our own Pierre Mitchell). If one of the 800-pound gorillas has a tail spend problem — and we say that as politely as possible, given the fact that Spend Matters and Amazon Business joined forces on the indirect spend research study underpinning this report and the webinar — chances are, your organization is, too.

The role of today’s corporate travel manager or category manager is more demanding than ever. The manager must not only take responsibility for the travel budget, be a skilled negotiator, understand technology, leverage data and manage travel policies, contracts and compliance, but also deliver value to the organization. And of course, they must also keep the corporate traveller safe and be risk-aware. How can practitioners prepare to handle all of this and more?

Travel and expenses management software provider Certify recently released its latest SpendSmart Report, analyzing business travel spending for Q3 2017. Lyft is experiencing impressive growth, while its ride-hailing rival Uber, as well as taxis and car rentals, are seeing declines. The data comes from 10 million business travel receipts and expenses that are processed via Certify’s system. Certify then analyzes the data by category, such as ground transportation, meals and lodging.

Spend Matters welcomes this guest post from Scott Dever, vice president of member development at Corporate United.

Targeting areas of unmanaged indirect spend is a key way procurement leaders can deliver value and maximize savings, and ultimately extend their reach and influence. Traditionally, this unmanaged spend has challenged procurement for a number of reasons. Decentralized decision-making and fragmented buying creates a lack of visibility into spending, supplier proliferation and limited opportunities to support competitive sourcing. But increasing spend under management enables teams to realize many worthwhile benefits, including incremental cost savings, supply base consolidation and reduced risk.