Managing Indirect Spend. Joe Payne

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Managing Indirect Spend

       Enhancing Profitability Through Strategic Sourcing

       Second Edition

      JOE PAYNE

      WILLIAM R. DORN

      DAVID PASTORE

      JENNIFER ULRICH

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      Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

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      ISBN 9781119762348(hardback)

      ISBN 9781119762492(epdf)

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      Managing Indirect Spend is and always will be dedicated to Abraham Podolak and Steven Belli. Without your perseverance, vision, and enthusiasm, these pages would surely not have been written. Your joint leadership, guidance, and compassion built a unique company that changed all our lives forever.

      Preface

WE WROTE THE FIRST EDITION of Managing Indirect Spend in 2010. At that time changes were happening in procurement, and many organizations were moving to centralized indirect spend and fully leveraging the aggregated purchasing power of their companies. Investments in procurement were high, with organizations adding people, processes, and technology to meet their objectives. Early in that decade, much was written about “Procurement 2020” and how far the function had come.

      Still, not everyone got the memo. When we wrote the first version of this book, strategic sourcing and category management for indirect categories was still relatively new for many organizations. Now, organizations have teams of category managers, third‐party outsourcing, and comprehensive savings tracking. At the same time, they still have many of the same problems as they did in those early days. They lack spend visibility, they're seeing diminishing returns in terms of cost savings, they're having trouble driving change, and procurement is still perceived as a tactical, nonstrategic function.

      The organizations that were in “build mode” earlier in the decade now need a seat at the table at the C‐level, they need investment in new systems that drive adoption and compliance with procurement policies through enablement, and they need training for their teams. They struggle, however, to create the business case for this investment. As Kurt Vonnegut wrote in his novel Hocus Pocus, “Another flaw in the human character is that everybody wants to build and nobody wants to do maintenance.”

      Many large organizations—from publicly traded services companies without procurement departments, to large industrial manufacturers that allow each plant to purchase independently without leveraging volumes, or