We continue our series on the top 25 procurement myths. Some you may know, others maybe not. You also may agree with us on certain ones and not others. But, the important thing is that we have this discussion. We will post one a day here on Chief Procurement Officer, so make sure to check back on the site to catch them all.
7. Some costs might go up, but spend should always go down
To a CFO, “spend” simply means cost. And costs should go down. Yes, some costs really are investments (like the investment in strategic procurement resources!), but the CFO will roll his or her eyes and say, “Yeah, everyone thinks their costs are investments.” And since procurement usually is a champion – if not the champion – for similarly viewing spend as something that should universally go down, then procurement is really acting like the CFO above, when in fact, the broader business is constantly trying to evaluate whether an increased investment is worth it in terms of subsequent ROI.
As such, procurement must consider the situations when third-party spend is really cost and not just investment and when those investments should go up.
For 3 examples of this, see here.