Tag Archives: spend analysis

5 Tips to Help Prevent and Control Maverick Spend

A little innovation never hurt anyone. But whilst Maverick Spend may cause us to re-evaluate our processes, it can wreak havoc and cause long-lasting damage. Georg Roesch outlines 5 ways you can prevent it from happening and keep it under control.


Being a maverick isn’t all bad. Just look at Steve Jobs and Sir Richard Branson. Their outside-the-box ideas drove innovation and resulted in enormous successes. But for companies trying to manage spend (and let’s be honest, who isn’t?) rules-are-meant-to-be-broken behaviors such as maverick spend can wreak havoc on processes and, ultimately, your company’s bottom line. The upside is that it creates opportunities for procurement managers to re-evaluate processes, identify shortfalls and tighten spend gaps. But if left unchecked, it can – and will – end up costing your company money in the long run.

What is maverick spend?

Maverick spend is defined as buying from suppliers without following the company’s pre-established procurement policy. Purchasing goods or services out of contract or from non-preferred suppliers means that your company doesn’t benefit from the preferred supplier discounts that you worked hard to negotiate. Even worse, it can harm vendor relationships, affect future contract terms and open the door for underhanded business practices.

 So why do employees “go rogue” and, more importantly, how can you stop it?

Here are five tips to maverick-proof your procurement processes.

1. Identify maverick spend.

Spend visibility is key. After all, you can’t save or fix what you can’t see. Do you know how much maverick spend costs your company? Or the work areas and spend categories where non-conformity occurs? A thorough spend analysis can help you identify gaps across all spend data sources. From there, you can pinpoint the who, what and where and put an action plan into place.

2. Determine why maverick spend occurs.

Most employees don’t “go rogue” on purpose or with ill intent. They simply may not understand the procurement process. Or they may find it cumbersome and time consuming. eProcurement software can be intimidating, especially to employees who don’t use it regularly. Or they may see better prices elsewhere, not understanding the costs associated with invoice and payment processing or expense reimbursement.

Whatever the reason, regular efforts to explain the “why” and share the value can go a long way in gaining buy-in. Consider hosting (bring your own) lunch and learn sessions, recognising outstanding department or individual accomplishments, and providing a forum for employees to recommend vendors and give feedback.

3. Review the entire procurement process.

If you find your procurement process difficult, simplify with a more user-friendly solution. There are a lot of affordable and easy-to-use automated eProcurement options on the market.

The key is to find a solution that’s easy to use and all-inclusive (one that sees all direct and indirect spend) that integrates with your enterprise resource planning (ERP) system. This ensures that all employees have access to the right information at the right time.

4. Hold people accountable for their expenses.

While creating processes is your job, spend management is everyone’s responsibility. Every manager in your organisation should know exactly what’s being spent in his or her area, who’s spending it, and how much spend occurs outside of contract or supplier network.

If you have a coupon at home for Papa John’s pizza, you’re probably not going to order Domino’s and pay full price. While this is a simplistic example, the same holds true at work. It just may be that employees don’t know what discounts exist or aren’t being held accountable for purchase price variances.

5. Close the gaps in your procurement process.

Additional measures to consider to reign in maverick spend include:

  1. Limiting or eliminating P-card use to only certain vendors, merchant categories and / or dollar amounts. P-card usage can be difficult to monitor and measure which is why some companies are eliminating use altogether.
  2. Limiting who can set up new vendors. Do you have a well-defined process for onboarding new suppliers? If not, you should.
  3. C-level review of all non-contract or outside supplier network spend.

In the end, maverick spend and not playing by the procurement rules costs organizations BIG money. By digging deeper into the purchasing experience and the challenges and frustrations your employees encounter, you’ll better understand why maverick spend occurs, where it happens most often and, most importantly, what solutions you should implement to stop it.

Maverick spending is just one of the six challenges listed in our white paper on transparency in indirect spend. Read about the rest here.

6 Elements Of A Robust Category Strategy

A robust Category Plan and a Strategy will guarantee significant impact for your organisation with these 6 elements.


In my last article The #1 Reason You Need a Well- Defined & Formally Documented Category Strategy!, I purposefully oversimplified what a category strategy is by stating that it answers the 5 W’s (Who, What, Where, When, Why) as well as the How of a particular group of spend. Ultimately, it will act as a guide to the Category Manager in his/her application of different procurement levers & tactics to generate value in the assigned spend area. I want to dive a little deeper on this topic by discussing 6 key elements that make up a robust category strategy:

1) Internal Needs Assessment: this should set a baseline for the category and provide a basic understanding of sub-categories, major suppliers, key requirements & stakeholders, internal controls/policies currently in place, and a brief category history and some of the challenges & successes it experienced. This section is particularly useful when reviewing your category strategy with someone who is unfamiliar with the category and its scope.

2) Spend Analysis: the foundation of any category strategy depends upon a solid understanding of the historical and (ideally) forecasted spend. Without accurate and granular detail, it’s hard to imagine how you can formulate any worthwhile strategy that you can feel confident in. If you didn’t do anything else in developing a category strategy, at least conduct a thorough spend analysis before making any type of recommendations to stakeholders or your leadership. There are a million different ways to slice and dice your data, however, at the bare minimum you should break your spend down by sub-category, supplier, location, and business group/facility. Data visualisation is worthwhile to mention here and a skill in itself: how do you take data and transform it into an eye-opening story that opens the door to powerful business insights? There are several data visualization tools out there like Tableau that can help with this, but you can never go wrong by simply utilising Excel or PowerPoint. One of my go-to formats to visualize spend data is the infamous Pareto!

3) Supply Market Analysis: understanding of the supply market is key to developing a robust strategy. You can begin by gathering market intelligence and benchmarking information via a myriad of places and sources, however, Beroe Live is a decent place to start and it’s free. Commonly used market analysis tools are the Porter’s 5 Forces model as well as the Structure, Conduct, Performance (SCP) model. Personally, I feel Porter’s 5 Forces model is more useful when entering a specific sourcing event or deal negotiation as it will help analyse the level of competition that exists at a specific point in time. Therefore, I tend to utilise the SCP framework as party of my category strategy development process.

4) Category Segmentation: segmentation modeling really sets you up to effectively apply the appropriate strategies for the goods/services you are sourcing and should help prioritise where you spend your time and with who. The Kraljic Matrix, developed by Peter Kraljic, is a segmentation model that evaluates two key factors:

1) the overall importance of the good/service (commonly based off total spend, profitability impact, or value-add to the company) and

2) market complexity or supply risk.

These factors are then evaluated on a Low to High scale across 2 x 2 matrix creating 4 quadrants or categories: 

Strategic Items(High Value + High Market Complexity/Supply Risk)

Leverage Items (High Value + Low Market Complexity/Supply Risk)

Bottleneck Items (Low Value + High Market Complexity/Supply Risk), and 

Non-Critical Items (Low Value + Low Market Complexity/Supply Risk).

Similarly, this tool can also be used to segment your suppliers. This is important to note because your counterpart on the other side of the table has most likely engaged in a similar segmentation process in helping them evaluate the strategies to deploy with their customers. Do you know where you fall in their model? Does your supplier/category segmentation align with how your supplier views you as customer?

5) Strategy: all the fact-based analysis that has been conducted up to this point should highlight and allow you to articulate 2-3 high level strategies that will guide all procurement activity that will occur (I highly recommend anyone engaged in Category Management to read The Purchasing Chessboard as it is a great tool to stimulate thinking around category strategy, procurement levers, and tactics that can be deployed). It should also include goals or KPIs to help measure the effectiveness of its implementation. Leveraging 1 of the 4 general strategies in the The Purchasing Chessboard, if my strategy is to “Leverage Competition Among Suppliers” one of my goals or KPIs could be “Achieve 15% year-over-year costs savings in x good/service for next three years”.

6) Category Plan: now that you have this amazing strategy with lofty goals to save millions, a list of initiatives, projects or tactics must be developed that will deliver the results. The Category Plan should call out the name of the project, description of the project or tactic to be used, strategy alignment, value, and timing. A Project Prioritisation Matrix is a useful tool here to help you through this process. Although you may not formally develop criteria to plot your project on the matrix, it’s important to think about the Business Value and Ease of Implementation of the initiatives you have listed.

In summary, a category strategy is much more than a document that answers the 5 W’s as it becomes the critical guide to the Category Manager in his/her application of different procurement strategies, levers & tactics to generate value for the company they represent. By including these 6 elements in your category strategy, you are sure to deliver significant impact for your organisation and see transformative results.

Let me know your thoughts and the tools you utilize to develop your category strategies (I’ve created a Category Strategy template for those who may be just getting started!)

Spend Analysis Is A Secret Weapon

Spend Analysis can help build a roadmap on category sourcing and capture savings.


I firmly believe that spend analysis is probably the simplest yet smartest exercise a procurement department can conduct. And I’m not talking about leveraging a spend cube technology and running a GL file to get some rapid classification, albeit, that is the first step many of us take. But how about those of us who don’t have a robust spend technology deployed yet? Well, good news is that the value of analyzing spend is not in the complexity of the tool, or the visualizations that it produces, or even how quick they are produced; but it lies in the power of understanding spend patterns and asking the right questions behind those visuals and tables.

For many years my team and myself have conducted spend analysis exercises in MS Excel or Access and things have worked out very well, and we’ve learned a fair share of valuable lessons in terms of both effective spend classification, as well as result interpretation. This last one critical in operationalizing and mobilizing procurement teams. Unquestionably, these lessons when applied together can become a secret weapon to an organization, and even if every company applies them, the “secret” part of it remains true as every spend profile is different to each company as well as the strategies employed to develop a competitive edge. Here are some of the things, I’ve learned from analysis dozens of spend profiles over the years:

Spend Analysis can help build a roadmap on category sourcing and capture savings. This is no secret, as it is the primary reason why anyone would run a spend analysis. The mechanisms by which spend is classified and categorized help organizations understand where money is going, to which vendors, in which regions, on which categories and how diluted or dispersed spend might be across these areas. Accurately classifying spend is the first step in identifying levers across spend categories, where aggregated volumes might drive value or how “quick-and-easy” it might be for the organization to identify and drive savings to the organization.

Spend Analysis is key to identifying tail spend, even more so, in defining it. Which seems to be almost a bi-product of the spend analysis exercise itself. Because Spend Analysis relies in tying suppliers to categories, irrespective of the taxonomy used, thresholds are typically set based on spend levels, which ultimately will put all the “unclassified” spend in one large bucket conventionally (but not conveniently) addressed as “tail”. Let me tell you a secret, Tail Spend is a big problem for a lot of organizations because that’s where a lot of unmanaged, unsupervised spend goes, this is where procurement policies and procedures die and all controls are lost, but inherently, where a lot opportunity resides. Controlling tail spend is a major priority for organization, especially those who have already executed on a sourcing roadmap and deployed (some) category management.

Spend Analysis helps – very accurately – identify procurement behaviors. Remember that tail spend conversation we just had? Well, analyzing tail spend can help us determine when buyers across the organization are buying from suppliers who are part of managed categories but who are not part of the negotiated deals the organization has in place, repeatability of this pattern with the same “unmanaged” vendor may mean the buyer has a preference towards that vendor, for whichever reason (e.g. buying from Lowes where a contract with Grainger exists); conversely, finding many “unmanaged” suppliers under the same category may mean the buyer isn’t aware of the deals that might be in place with a preferred vendor (i.e. buying from Fastenal, Lowes, Amazon, and McMaster Carr instead of simply Grainger), doesn’t know how to follow a process to purchase from that vendor, or more interestingly, the buyer may have a preferred payment mechanism or process to use, which by the way, it typically defaults to the one that’s easiest. A good rule to follow is that the easiest procurement process should also be the right process, needless to say organically decreasing rogue spend.

Spend Analysis enables compliance by driving visibility into all the things above, and helps us start asking ourselves questions about why we see purchasing patterns that should not exist, define how prevalent they are, what regions or departments are reoccurring offenders or even understand how some of those vendors are being paid. I’ve seen a lot of customers who prefer one payment method over others, some like the P-Card approach as they benefit from the rebates, some others prefer limiting their P-Card spend as much as possible in order to drive technology efficiencies into the payment process – think of dynamic discounting and supply chain financing methods, as some of these benefits.

Last but not least, spend analysis is a tool to mitigate risk across supply base and enhance supplier relationship management best practices. Think about it, knowing how much you spend with a certain supplier can tell you how much leverage you really have to negotiate pricing, but it can also tell you how much you rely on a given supplier to enable the continuous operations of your organization. If a stationery supplier goes bankrupt overnight, your business may be able to stomach that. But what happens when a supplier in a more critical category is badly exposed to risk, perhaps a supplier who produces a patented part to your broader supply chain process across the world? Knowing how much the business relies on its extended supplier network, with a high confidence level, is critical in managing inherent risk and adapt quickly when needed.

The value of ongoing and disciplined spend analysis can offer many insights into how the organisation operates. It provides windows into efficiencies and opportunities that may be captured by the business.  Moreover, spend analysis is not a “one-and-done” thing, the more frequently it is done, the clearer the trends and patterns become. If you are able to integrate spend analysis into other valuable source-to-pay tools and technologies, the company can really benefit from quick improvements and a sustainable procurement function. Spend analysis can enable a competitive advantage, you may even want to see it as the most exclusive secret weapon at your disposal.