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 Starts:

  1. Leveraging RFQs. Ensuring that all major spend 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 persons who are authorized 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.
  2. Increased Visibility. Ensuring that all purchases receive a high degree of visibility, scrutiny, and fiscal accountability is another way spend can be managed before being enacted. Fraudulent purchases can be eliminated by ensuring purchasing visibility.
  3. Leveraging an Annual Buying Plan. Key components of an Annual Buying Plan include a Forecast or projection of quantities to be purchased, a Process by which products will be procured, a Savings Target, and Cost Reduction Techniques. A budget can be included in the buying plan.
  4. 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.
  5. Empowerment of Employees from other Departments to make their Purchases: This helps to speed up and simplify the purchasing process, thus reducing the Total Cost of Ownership. It also frees up the time of Procurement Staff to focus on Critical High Spend items that require expert negotiation and other high caliber skills.
  6. 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 involve 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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David Millington

David Millington M.Sc.QSM, NPDP, CL6σBB, SPP, SPSM3®, CM® Director of Education (Next Level Purchasing Association) A Certified Strategic Planning Professional, David Millington brings over 18+ years experience in the Strategy Execution, Product / Service Development, Organizational and Supply Chain Excellence Arenas. He is a Certified Supply Chain Professional, Certified New Product Development Professional, Certified Strategic Planning Professional, and a Certified Lean Six Sigma Black Belt. David holds a master’s degree in Quality Systems Management, from The National Graduate School of Quality Management, Falmouth MA, USA. This equips him with mastery of vast bodies of knowledge and best practices. David Millington brings hands-on experience at VP, Director, and Manager Levels, guiding and facilitating the development of strategic and tactical solutions to intricate organizational, product, and service challenges.

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