Managing Spend is a critical part of the Procurement function. Spending in an ad-hoc manner often results in rush orders, overspend, and excessive inventories. Ensuring a robust, planned, budgeted, and technologically equipped process will indeed yield the opposite effect.

The following are ways to Manage Spend before it begins:

Leveraging RFQs

Ensuring that all major spending goes through a robust Request for Quote Process is an effective way to manage spend and positively affect your organization’s bottom line. The key is to hold all authorized persons to purchase products and services accountable for going through your RFQ process. It is also important to standardize your RFQ rules, processes, and templates, to get the best results. This should be done even if good relations exist with your suppliers.

Increased Visibility

Ensuring that all purchases receive a high degree of visibility, scrutiny, and fiscal accountability is another way to manage spend before it is enacted. When you ensure purchasing visibility, you can eliminate fraudulent purchases.

Leveraging an Annual Buying Plan

Key components of an Annual Buying Plan include a Forecast or projection of quantities to be purchased, a Process that ensures procurement. Include Savings Target, and Cost Reduction Techniques in this list. Finally, include a budget in the buying plan.

Robust Approval Processes

This is the hallmark of an effective Procurement System and an effective method to control and manage spend beforehand. Only persons on an approved list should be allowed to purchase products and services. The key is that this approved group of individuals have an approved limit and types of products and services that they can purchase.

Empowerment of Employees from other Departments to make their Purchases

This helps speed up and simplify the purchasing process, thus reducing the Total Cost of Ownership. It also frees up the Procurement staff’s time to focus on Critical High Spend items that require expert negotiation and other high-caliber skills.

Effective Procurement Technology

This is an essential component of managing spend before it unravels. Robust Technology can tie in points 1 to 5, RFQs, Visibility, Buying Plan, and Robust Processes. The key to selecting Procurement Technology involves all users in the selection process as this will reduce resistance to change and increase buy-in. Blockchain Technology can be very effective in reducing fraud and enhancing visibility in your purchasing process.

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