Spend Leverage

An article recently posted in an issue of Supply & Demand Chain Executive briefly detailed the new trends in sourcing and procurement practices. The author discussed the traditional process of setting up the purchasing team within an organization and developing processes and procedures that would ultimately create the most savings for the organization. He continued by examining how new challenges and trends created the need for better practices, and a more strategic approach to spending. By focusing on specific spend categories that are considered strategic to a business, your company is on the right track to establishing better purchasing methods. Categories that are considered strategic are those which have a high risk of supply loss and high value as a product or service. For items that are considered strategic to a business, the main focus is on your relationships with suppliers. By targeting these particular areas, organizations can streamline their savings initiatives and push for much greater efficiency. What the author ends up driving at is that there is more to sourcing and procurement than what we traditionally know. He states that companies need to leverage their spending by collaborating with other businesses to maximize utilization of resources. Outsourcing procurement services provides another approach that can create better efficiency and provide for expertise that will eventually lead to even greater savings. Companies can also join a Group Purchasing Organization (GPO) to consolidate spend with other companies and leverage better pricing. The idea of the article is that organizations need to look beyond their basic means to expand their opportunities. We are in an age of vast knowledge that is at our fingertips, all we need to do is direct our focus. Even the smallest of companies can have multiple suppliers, which means multiple contracts and multiple spend categories. No matter what size company, they can take advantage of leveraging their spend and with the right management they can realize the most potential savings.