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The implementation of a Spend Management Vision – a dedicated function within an organization is very common in most large organizations. While most organizations that have a Spend Management Vision and Department realize the benefits and efficiencies, organizations that do not have those functions resident in their organizations probably do not realize the costs of being highly decentralized.
Most organizations in the U.S. and Canada are decentralized in their purchasing approach. What that means is various leaders, managers or employees within departments are charged with managing selected expenses, including the periodic shopping, quoting, benchmarking and negotiation with suppliers.
COVID was a 2 x 4 to the head in terms of getting our attention and showing us how quickly a business can go from something amazing to pure survival mode. During early COVID times management teams were scrambling to gather information and executing strategies to cut costs quickly, not knowing when business would come back, if at all.
All organizations have a purchasing function within their operations. Some organizations centralize their purchasing activities with one group to leverage spend, reduce costs and drive economies of scale. Other organizations decentralize their purchasing responsibilities and spread that responsibility to management closest to their operational responsibilities to maximize the category expertise.
My business has been supporting all types of businesses and non- profits for over 25 years with spend management strategies. This isn’t to brag, but it is to say that we have worked with many businesses and learned something from them.
As we’re approaching the end of 2021, many businesses are finding some disappointing profit margins. With the volatility of 2020 and 2021, it’s likely that your profitability suffered. While we can’t predict what will happen in 2022, one thing we can do is offer some tips for effective cost management strategies. Many businesses spend more on supplies and vendors than they actually need to, which causes extra spend and less profit.
