Procurement Pros Divided on Best Ways to Control CostsControlling Costs is Top Priority for 2011; For Complex Categories, Where and How are Up for Debate
While debate around the state of the economy continues, procurement professionals at ISM last week confirmed that one of their top priorities for the next 12 months is controlling costs. But after several years of cutting spending, when asked in a pulse survey sponsored by Rearden Commerce about where they'll look for the next layer of savings, there's a surprising lack of consensus:
- 32% believe more spending should be under procurement's control.
- 28% say that enterprise-wide visibility into spending is the key to keeping costs down.
- 23% think that putting an end to off-contract purchasing will make the biggest dent.
Among survey respondents, there was one area of general consensus: 60% placed consolidating the supply base at the top of their agendas. But while reducing the number of suppliers may reduce the management burden, this strategy can in fact, increase off-contract spending, as users feel that the choices they have aren't able to meet their needs. The key to maximizing choice, while minimizing complexity, is to create a shared environment where both the user and the procurement team can access, engage and transact with many suppliers.
"The results of the pulse survey reflect what procurement teams have always said: they can't control what they can't see," said Henry Hwong, Vice President of Product Marketing, Rearden Commerce. "But recapturing millions of dollars lost annually requires that you plug all the holes, not just one – that's where a platform for managing many categories as well as the entire lifecycle of a purchase comes into play."
Complex Category Management: T&E Management Illustrates the Case
In travel and expense management, the procurement challenge of controlling costs is especially complex in 2011. The growing trend where cost increases are passed directly onto the buyer in the form of "unbundling" of fees such as fuel surcharges make it especially hard for procurement teams to truly keep costs under control. Exacerbating the problem is the relative narrow focus of today's travel management platforms, which only offer the traveler a way to procure the "usual" segments of a trip: air, hotel and rental car, leaving the buyer to their own devices for all the other components – such as ground transportation, conferencing and more. It's here – where procurement has little visibility or control over what's purchased – that costs can quickly rise, well beyond what's expected.
To give procurement teams a better way to control, view and manage goods, services and T&E spend, Rearden Commerce offers an innovative Web-based platform complete with a mobile-enabled component. From a single place, users can view all of the aspects of all of their purchases, from simple procurement of indirect goods, such as office supplies and laptops to complex services, including planning and managing a trip and filing expenses. From a bottom-line perspective, these platforms give procurement a significant boost in ensuring compliance and reducing costs.
"The single best way to improve visibility and strengthen supplier relationships is to bring as many categories, suppliers and vendors as possible onto a single spend management platform," said Hwong. "This gives procurement more control, offers users flexibility and choice, and ultimately saves companies money."