Here at OfficeTeam we are all about optimising and making the best strategic use of indirect supply chains. That’s basically what our Tail Management concept is about.
Many organizations struggle with visibility and control across their indirect supply chains due to the high numbers of suppliers, products, categories and stakeholders involved. This makes it a key area for improvement so here we take a look at the 10 key ways you can gain better visibility of expenditure across your indirect supply chain.
1) Identify your business needs: By identifying your business needs and determining your corresponding data visibility needs, you can begin planning and identifying a solution that will address the requirements of your business.
2) Implement a common data language: Implement a common data language across all suppliers in a format that is visible and usable by your sourcing, accounting and finance units. Increasing your visibility will allow detailed internal analysis and provide the ability to effectively assess and benchmark suppliers.
3) Reconcile and classify your data: Reconcile data disparities and correctly classify data to a level of detail that is compatible with insightful analysis. A number of classification “standards” exist, such as standard industrial classification (SIC) or NAICS codes, Universal Standard Products and Services Classification (UNSPSC) and eCl@ss.
4) Utilize specialist spend analysis software applications: Make use of specialist software applications to extract and cleanse spend data from multiple sources and systems. These applications can classify data by product/service category, supplier, and internal stakeholder.
5) Secure access to flexible internal reporting and supplier reporting: Gaining access to flexible reporting and analysis on an on-demand basis is vital for maintaining visibility and control of expenditure, as well as identifying patterns and savings opportunities amongst aggregate spending data. Flexible, ad hoc reporting and analysis capability enables companies to optimize existing procurement and discover new unanticipated opportunities.
6) Streamline the supply chain: Reductions in supplier numbers reduces supply chain complexity making it easier to monitor and control spend and inventory. Management information and reporting becomes more standardized across the supply chain and supplier data becomes quicker to access and generate meaningful insight from. Select suppliers that can provide data in formats that match your business needs and software requirements.
7) Ensure compliance: Examine levels of non compliance where stakeholders have made purchases outside of the negotiated supply chain. Track and measure percentage and actual losses, then ensure that rogue spenders become responsible for their expenditure outside of negotiated supplier frame agreements. Non compliance should not exceed 2-3%.
8) Conduct regular supplier reviews: Conduct regular reviews to analyse the supply chain procurement and reporting data. Good quality suppliers will be eager to demonstrate that they are managing their supply chain well on your behalf and be able to propose opportunities for cost reductions and reduced consumption. Suppliers should be able to use spend data to clearly and accurately demonstrate where and how savings can be made.
9) Make use of supplier spend management tools: Engage with suppliers than provide meaningful management reporting and controls. Controls can include online ordering systems, employee authorization systems, spend limit systems and bespoke product catalogues. Tools such as these can enable you to maintain central control of expenditure whilst providing individual sites with the freedom to order the products and services they require.
10) Look at outsourced solutions: Outsourced solutions can provide a simple method for consolidating a number of fragmented product and service categories in a single location. This method can be particularly useful in areas where it may be uneconomical to hire in house expertise, or where costs would outweigh the potential savings such as tail spend. By managing the indirect spend of multiple clients these outsourcing partners can provide the market intelligence to manage and optimize this portion of your expenditure.
If you are interested in finding out more then contact us today if you would like to hear more about how we can help you implementing the strategies above.