The truth about off-contract spend

30 May 2012

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30 May 2012 | Adam Leach

The volume of off-contract spend is revealed in the findings of Supply Management research.

The Market Intelligence Survey, carried out in association with Office Depot, asked 877 buyers: “What do you think is the average leakage within your supply contracts?”

Almost a quarter of respondents saw the average amount of leakage - where products and services are purchased off contract or at a price different to that negotiated - was 21 per cent or higher. 10.8 per cent said it was between 21 and 30 per cent. 6.2 per cent said it was between 31 and 40 per cent. 3.7 per cent believed it was between 41 and 50 per cent. And 2.2 per cent thought leakage was greater than 50 per cent.

While 20.9 per cent believed it was just 0-10 per cent and 22.7 per cent believed it was 11-20 per cent, the number of people seeing the average as 21 per cent or higher suggested the need for greater compliance or clarity over purchasing processes. Further, just over a third, 33.5 per cent, said they did not know what their average leakage was.

The survey also found 60.3 per cent of buyers are looking to cut costs in the category of office supplies. In addition, 57.8 per cent were looking to business travel and 57.6 per cent to IT for savings. Interestingly, 7.7 per cent said they are not looking to reduce costs.

Respondents also indicated they see sustainability becoming more important as time goes on. Asked about procurement’s relationship with sustainability in two years time, 42.8 per cent of respondents said it would be significantly more important, while 36.5 per cent said slightly more important. Just 0.6 per cent expect it to be significantly less important. This is more significant given that 62.9 per cent of buyers already believe sustainability and CSR is important or very important when selecting a supplier.

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