At Biffa – a waste management firm – we engage with circa 4,000 active suppliers. It is therefore essential that the procurement team fully understand this spend data.
The spend cube is a powerful tool for any procurement professional. It should not be underestimated and should be reviewed regularly. Without this tool any category manager is unable to approach their category in a professional manner and any head of procurement will be unable to effectively resource their team.
A spend cube (with full categorisation) has provided clarity on the following:
• The total spend value for the business
• The total spend value in scope (that which procurement can influence)
• Direct/core and indirect/non-core spend levels
• The spend value per category
• The number of suppliers per category
• The spend value with each supplier
• Supplier spend and changing trends (monitored monthly, quarterly or annually as required)
General benefits of a spend cube
Any head of procurement can only build the right team structure and resource effectively if they understand all spend categories. Within Biffa, the 4,000 suppliers cover anything from fleet, fuel, haulage, HR, IT, MRO, waste and everything else in between, so a spend cube essential.
Any procurement category manager must evaluate their category spend and number of suppliers, before developing the category strategy. They need to know the company leverage in any spend category. This can help further build information and involve supplier RFIs (request for information), clarity on the demand profiles, RFPs (request for proposals) and supplier reclassification. The results of which may include some of the following:
• A reduction in the supply base
• Reduction in cost
• Improved value-add offers from key suppliers
• Enhanced relationships with key suppliers
• Development of a preferred supplier list (PSL)
• Formal supply contracts
• Formal SRM and supply contract management (including contract leakage compliance)
If the company’s new supplier request process then also requires approval, it will prevent new suppliers being added to the spend category. This in turn will enhance compliance to the category PSL.
Using the Biffa spend cube the category manager was able to review the market, alongside the Biffa national delivery requirements and reduce the number of suppliers from 11 to 5 x suppliers in their category. The newly appointed 5 x PSL suppliers are now able to provide the following benefits:
• Improved lead time
• Improved value-add support to local Biffa sites
• 8% national saving across the category spend (a category where a cost reduction had already been achieved at 20% over the previous 12 months)
• Standardised supply contracts and payment terms for a PSL supplier
☛ Emma Craig is assistant buyer at Biffa