Groundbreaking Study Underscores the Increasing Importance of Indirect Spend Management for F1000 Companies
October 19, 2016 04:00 AM Pacific Daylight Time
JACKSONVILLE, Fla.–(BUSINESS WIRE)—ProcureAbility today announced findings from its comprehensive Indirect Spend Management Benchmarking Study. The broad-based study evaluated best practices and more than 50 qualitative and quantitative benchmarks and practice points across important dimensions of Indirect Spend. It found Indirect Spend Management to be increasingly important to Fortune 1000 companies due to critical factors, such as a growing Indirect Spend base, more effective Procurement tools and technologies, and increased confidence from stakeholders.
“Our goal was to help participants identify strategic and tactical Procurement initiatives that can improve competency in managing Indirect Spend—driving more savings and creating more value for the organization,” said John Evans, President and CEO of ProcureAbility, who spearheaded the study. “With an average return on investment of 12 times their cost in savings, we are seeing that Indirect Procurement organizations are becoming a major value contributor. Our findings also showed on average participants saved 9 percent of total Indirect Spend annually. This makes it a ‘no brainer’ for organizations to provide a greater focus on Indirect Procurement.”
More than 30 large-cap, North American firms across 9 industries participated in the study. The average annual Indirect Spend was on average $2.6B, with 85 percent actively managed by Procurement utilizing more than 4,000 suppliers. Most metrics and practices were organized across three primary themes: Value Creation, Operational Excellence, and Strategies for Growth.
“Historically Procurement organizations have focused mainly on Direct Spend, leaving much of Indirect Spend to be managed by internal stakeholders,” added Evans. “The trend we saw is that many companies now have dedicated teams focused specifically on Indirect Procurement—the materials and services that do not go into a company’s finished product. We saw that top initiatives planned by innovative companies included a greater use of formal category management processes, increased use of technology, and continued organizational centralization and collaboration.”
The study shows a growing and shifting footprint for new spend categories that were once considered “sacred cows,” such as Professional Services, HR, and Marketing, are now commonly managed by Indirect Procurement organizations. Other trends include: spend increase, from increased outsourcing and use of contract resources; a greater focus on Indirect Spend when compared to previous years; and advances in Procurement technology that are helping Procurement organization gain control and visibility over Indirect Spend.
To receive the full range of benchmarks and participate in this study to see how your organization compares to other participants, contact ProcureAbility today. There is no cost to participate and participants receive a personalized benchmarking comparison report. To download a copy of the general findings, visit Procureability.com or call 888.824.8866.