Indirect spend gets low priority

15 October 2009

16 October 2009 | Steve Bagshaw

Purchasers dealing with indirect categories manage a greater number of suppliers, three times as many stakeholders and face much more maverick spend than those sourcing directs, according to our research.

A survey carried out by SM and procurement outsourcing firm buyingTeam found indirect categories are a low priority in 49 per cent of businesses. Around half of organisations also lack the resource or strategy to source them effectively.

About 250 buyers responded to the Market Intelligence Survey comparing direct and indirect procurement. Their organisations' total annual spend is £187 billion and they have combined responsibility for £55 billion of indirects.

The research found that, despite accounting for around a third of spend, indirects on average cover 53 per cent of an organisation's total supply base. The findings also show that buyers dealing with indirect spend areas typically have more than three times as many internal stakeholders as those dealing with direct categories. Further, 43 per cent of respondents said the volume of stakeholders was the largest challenge they face.

There is also more maverick spend in indirects. As the graph shows, the amount of non-procurement spend for indirects is much higher than for direct purchases and in many cases organisations have little centralised control over these areas.

"Indirects are different to directs - more stakeholders, more diversity of suppliers and less engagement from the business. Indirects lend themselves to a different approach and the rationale for outsourcing has become clearer," said Guy Strafford, client services director at buyingTeam.

The study also revealed the reach of procurement, with professionals responsible for marketing services at 50 per cent of organisations and for professional services at 64 per cent.

The full results will appear in a future issue of SM

SMoct2009

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