Welcome back to another installment of Whitepaper Wednesday here on the Purchasing Certification Blog. In today’s installment, I’ll be reviewing a whitepaper entitled “An Improved Spend Management Strategy: Shifting Procurement’s Paradigm of Rogue Buying” from WisdomNet.
Rogue buying is a problem for many organizations. So I felt that this was a whitepaper addressing a good topic.
The whitepaper almost lost my attention early. It was written in 2006, discussed a just-ended recession, and described the procurement challenges of doing business in a sizzling global economy. Not exactly the situation we face today. Yet, I had the feeling that there would be some currently valid nuggets of information in the pages ahead.
I was right.
The core of this whitepaper is the chapter on the “Spend Management Five P’s” – an adaption of the four P’s you may have learned if you were a business major and, therefore, had to take Marketing 101 in college. The Spend Management Five P’s are people, product, price, place, and promotion. (For those of you who were spared Marketing 101, the last four are the four P’s of marketing).
In addressing the first P – People – the whitepaper focuses on analyzing spend data differently than most procurement departments do. Specifically, it says that “spend analytics should become a procurement executive’s customer relationship management repository, providing the information necessary to position the procurement organization’s spend management strategy to serve its customers.” It also stresses the importance of analyzing and engaging with internal customers in such a way as to anticipate their purchasing needs in advance.
This section also tries to offer insight into the rationale behind rogue buying: “Rogues don’t circumvent policy and procedure just for merriment. Rogue employees spend the way they do because they are not aware of either the contract offerings, the established guidelines, potential procurement team value-add, or because they find the current process ineffective to satisfy their needs.” Again, the whitepaper highlights the value of using spend analysis to enable procurement professionals to become “investigative, not judgmental policy enforcers” and, as a result, “minimizing the direct influence of outside vendors on employees.”
With regard to the second P – Product – the whitepaper positions the procurement department’s service as the product that has to compete for market share against the alternative of rogue buying: “Rogue customers should have the ability to choose from internal or external sources that provide the best value with the most effective and efficient service. Taking this competitive perspective, procurement executives must build an innovative and high performing buying team…Without this focus on operational excellence and client service, the procurement organization becomes a corporate bureaucracy – not an innovative source of competitive advantage.”