Tag Archives: maverick procurement

4 Ways To Reduce Maverick Spend

The Hackett Group estimates that maverick spending can cost companies up to 2 per cent of all indirect spending, due to lost savings opportunities and inefficiencies. That amounts to millions of dollars wasted every year.

Dean Drobot/ Shutterstock

Maverick spending, also known more formally as unmanaged spending, is a big problem for most companies. Maverick spending is when employees “buck the system” by going outside of contracts negotiated with preferred suppliers to purchase goods and services on their own, normally paying much higher rates. It occurs most often in areas of indirect spending, which includes large, diverse categories like MRO (maintenance, repairs, and operation), office supplies, professional services, and contract labor, to name a few. This diversity makes maverick spending behavior hard to spot and control. It’s not hard to spot the damage to the bottom line, though.

The ironic thing is that most negotiated supplier contracts are in place for the express purpose of governing tricky indirect spending categories. Yet studies have shown that a large percentage of indirect spending is still non-compliant.

What gives? Why do some employees still go off contract? Here are three eye-opening reasons:

  • Because they can – If there are no controls in place to enforce supplier contracts and negotiated rates, and no penalties for purchasing off-contract, it’s easier for employees to justify bypassing agreements when it suits them.
  • Because they don’t know any better – Especially in large companies, poor visibility is often blamed for maverick spending. If everyone in the buying chain is not aware of the contracts, or worse yet, contracts and catalogs are out-of-date, off-contract spending becomes more likely.
  • Because existing processes take too long – Slow ordering and approval processes are one of the leading causes of maverick spending. If approving a purchase and placing an order takes weeks, employees are going to go right around that process, especially in the case of time sensitive needs.

So how do you stop it? Put plain and simple, maverick spending will not stop until an organization does something about it. There’s a saying that goes, “Make the right way easy, and the wrong way hard.”

Here’s how to reduce maverick spending, so you can get better compliance, and realize some savings from your supplier contracts:

1.Put a system in place for better control

If you haven’t thought about this already, you should strongly consider implementing a purchasing system that automates all of your purchasing, regardless of commodity, approval process, or supplier. Purchasing systems make your entire purchasing process more efficient by governing requisition, approvals, buying, receipt, reconciliation, and reporting. They also serve as a “corral” for maverick spenders, by running all spend through a single platform, and providing only one way to do all purchasing.

2. Provide an intuitive and easy user interface

When putting a system in place, look for a best-in-class solution, known for being easy to use, and place where users can actually find goods or services they most commonly need. Usability and an intuitive shopping experience like consumer e-commerce sites will provide an inviting atmosphere that attracts off-contract purchasers back into the fold.

3. Simplify workflow procedures

World-class purchasing systems can streamline even the most complicated workflow procedures, making it much easier for employees to comply. Cumbersome purchasing processes that used to take weeks can be reduced to days or even hours. Even in cases where complicated ERP or accounting systems are gumming up the works, integration with cloud-based solutions are available to reduce traditional time, cost and resource hurdles and help simplify workflow for employees.

4. Take it seriously

It’s hard to believe, but maverick spenders still sometimes dodge even the easiest and most intuitive systems. The good news is, the spend analytics available in purchase-to-pay systems can tell you exactly where that rogue spend is coming from. Once it’s identified, it becomes much easier for management to enforce spending policies in those areas.

Big Ideas Summit 2016: Big Idea #29 – Hug a Maverick

Need a different solution to help stop maverick spend in your procurement organisation? Why not hug a maverick?

At the Big Ideas Summit 2016, we challenged our thought leaders to share their Big Ideas for the future of procurement.

From ideas that have the potential to change the very nature of the procurement profession, to ones that got the assembled minds thinking about the profession’s impact outside of the organisation, the response we received was amazing.

Give Them a Hug

Stuart Brocklehurst, Chief Executive at Applegate Marketplace, argues that procurement’s importance to the organisation has never been greater. However, it still only has influence over a small proportion of the spend area it’s responsible for.

Stuart also believes that this change cannot come about by ordering changes and laying down the law. But procurement can start the process by “hugging a maverick” – engaging with people and enabling them to understand the benefits of working closely with procurement.

Catch up with all the delegates’ Big Ideas from the 2016 Summit at the Procurious Learning Hub.

Want to find out more about Big Ideas 2016? And maybe what we have planned for 2017? You can visit our dedicated website!

If you like this (and you haven’t done so already) join Procurious for free today. Get connected with over 18,750 like-minded procurement professionals from across the world.

2016 Rewind – Top Discussions – You Asked, You Answered!

The Discussions page is one of the most popular on the site. We take a look back at the questions that got you sharing in 2016.

discussions

We’re continuously blown away by the generous nature of our community. Not only do you all connect so well, but you also are willing to share all your expertise. And that’s part of the reason that Procurious was formed in the first place.

We’ve seen it all during 2016, from how to start a procurement career, to the first three jobs you ever had. We also had questions on starting a new function, maverick spend, and social media.

So we’ve brought you the most popular discussions of the year right here.

Career Discussions

It stands to reason that as procurement grows as a career, so does the number of people wanting to join the profession. One question looked at whether to start in a procurement department, or a consultancy.

The consensus was that your procurement career would be better served starting out in a procurement department. Beyond the stigma frequently attached to consultants, it provided the opportunity to build a solid base of knowledge. Then, once experience had been gained, you could look to become a consultant.

Experience is big thing when it comes to procurement roles. However, few of us have procurement experience in our first three roles. Even as it’s less likely for people to ‘fall’ into procurement, the experience we have at the start of our careers is wide and varied.

Within the community, work experience included:

  • Waitress
  • Shelf Stacker
  • Car Washer
  • Sales Assistant
  • Fruit Picker
  • Paratrooper
  • Tele-marketer
  • And even one Santa!

And to tie the career discussions off, you got involved in a question about attracting young people to procurement. While there was definitely interest in the younger generation, a lack of knowledge stood in the way.

However, with more universities and colleges offering degrees linked to procurement this should change. What do you think? Does the profession need to seem more attractive? Or are we attractive enough, just bad at selling this career?

Getting Started & Automating

Does anyone have any advice about setting up a procurement function? This particular discussion got plenty of people sharing, and some great advice on starting from scratch.

The best starting point for a function was the business model – how it would be sold to the business. Within the model, procurement’s value was mapped out, and any blockers discovered. The model could then be built out with recognisable procurement concepts.

Other things to consider included processes and policies, and consideration of sustainability. Another critical item highlighted was engagement with stakeholders. After all, these are the people you’re going to be working with closest!

From the start, to the potential end, of procurement. If procurement were automated, would we need people in the function at all? Happily, most answers agreed that irrespective of automation, there would always be a role for people in procurement.

The consensus being that procurement processes could be automated, but relationships would still be vital. And no machine would be able to outperform a human on that. Yet…

Mavericks and Social Media

Our final trending discussions looked at one age-old problem, and one new one. First up, how to eradicate, or minimise, maverick purchasing.

Two themes ran through the answers – relationships and process. Root cause analysis usually came down to one or other (or both). Either processes were too complicated, or not followed, or people outside the function didn’t understand the value of procurement.

In all cases, listening to, engaging with, and educating stakeholders was a good step to take. It helps to showcase procurement’s role, and why processes need to be followed. And, if all else fails, there’s always a taser…only kidding! (Or are we…?)

Finally, as procurement and social media come closer together, there was the question of how connected the profession is. On the back of a provocative statement from Tania Seary, you discussed whether procurement leaders should have 500+ followers.

For many, it was a case of quality over quantity for connections. Despite there being a wealth of procurement connections on social media, many professionals only connect with people who they can strike up a meaningful relationship with.

Do you agree? Is 500 an arbitrary number? Or, as a leader, have you had enough time to build up this strength of network? You can still get involved in the discussion – all while building up your network on Procurious!