Developing and managing an indirect spend program can be a daunting task. What makes this even more challenging, though, is when you have limited time and resources – that’s where a lot of travel programs fall. Luckily, there are resources and partners that can help, a GPO being one such example.Here are some of the common mistakes we see during program development and category management and a process we believe is the best way to turn your indirect spend programs into well-oiled machines. I’ll use my experience with travel programs as examples.
It Doesn't End With Sourcing
Although program and category management have started to take hold, there is still much more focus by procurement teams on the upfront sourcing process and not enough effort when it comes to getting maximum value from current programs.
More times than not, companies pour countless hours into their sourcing process to establish strong agreements, but then they don’t manage the contract components with their supplier to validate savings and find further opportunities. For example, fluctuations in purchasing habits and product changes are behaviors that can affect spend levels and if managed appropriately, can be an added benefit.
A HOLISTIC VIEW OF CATEGORY MANAGEMENT
When looking at the process of getting an indirect spend program in place, there are key milestones that drive progress:
- Sourcing & Evaluation
- Supplier onboarding
- Adoption & Compliance
SOURCING & EVALUATION
In the early stages, companies should have in-depth conversations with all of the suppliers in the running and get specific questions answered:
- How can they provide insightful data?
- How is their company performing?
- Who is an ideal customer?
Next, discuss the objectives you would like to achieve with your new program, and run a holistic analysis so you have a solid understanding of unique requirements for your organization.
Using car rental as an example, many companies look at this offering and just want to know base rates. But there are many other components that affect cost:
- City surcharges
- Weekly and monthly factors
This detail creates a more complete picture of the quality of the program and gives better insight into the base rate number.
Companies might not realize that the onboarding process is a great time to update traveler profiles so both you and the supplier start the new program with the best data possible.
Utilize the supplier’s implementation resources to set program goals and objectives and determine the best way to measure progress moving forward. This is where supplier/buyer partnerships are key; the more insight you give them into your company, the better the onboarding and implementation will go.
ADOPTION & COMPLIANCE
Once you have a program in place, it’s time to announce the program and gain adoption. This is a critical time for companies in a more decentralized environment. Share information about early wins and find those early adopters who can be your program ambassadors. For example, a meetings and events program often relies on internal word of mouth for planners to quickly buy in.
Meetings with your supplier present an opportunity to look at compliance and to see if there are any changes in purchases that could affect the contract and cost structure. For travel programs, it’s important to keep an open line of communication with employees and make sure the program is meeting their expectations. Push your suppliers to bring innovative ideas, benchmark data and forward-looking recommendations on how to improve your program.
WHERE DO I START?
When trying to get complex areas of indirect spend under control, it’s even more important to stick to a sound process and have a great partner who acts as your trusted advisor. This way, you will get the best pricing possible while taking into account all of the customizations your organization needs.
Working with a GPO is a proven way to reduce spend, but working with the right GPO is the best way to ensure category management is expertly handled from sourcing to performance and beyond.