Indirect Spend Optimization

Realize effective and sustainable savings in procurement of indirect requirements.

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Leverage potential in procurement of indirect requirements

The procurement of indirect requirements is one of the largest areas of spend  in many companies. Depending on the industry, it accounts for 20 to 30 per cent of the total purchasing volume. Indirect spend includes all services, capital goods and consumables required for ongoing business operations that do not flow directly into a company’s value creation process. This includes services and indirect materials for specialist departments, such as IT and telecommunications expenditure, logistics, facility management or waste disposal.

Our experience from over 2,500 Indirect Spend optimization projects shows a high, often underestimated savings potential. With the goal of sustainably reducing costs in the company, indirect procurement is often neglected because the numerous expenditure items are not transparent and the procurement of these requirements is rarely structured. Yet an optimization of indirect procurement has a noticeable and often very short-term impact on annual results: Cost savings of between 10 and 20 per cent can be achieved through structured procurement of indirect requirements.

 

In indirect procurement, the challenge usually lies in the decentralized organization. Procurement processes are often managed from within individual departments and not centrally via procurement (maverick buying).

We support you in analyzing your requirements, create transparency and develop a clear requirements structure. In close coordination with internal users and stakeholders, we advise you on demand management and implement standardized, sustainable processes, taking into account possible digital procurement applications.

To ensure long-term success, the solutions developed are consolidated in individual training sessions. We can also support you in operational procurement through bundling and renegotiation with suppliers. Within the scope of our consultancy, the use of more sophisticated methods such as respecification or tail-end management is also possible.

Find out how we can support you with effective solutions.

Focus topics in indirect spend

Digitalization and IT Procurement

IT requirements are changing rapidly in the course of the digital transformation.

As a result, the spend and thereby the importance of IT Procurement is increasing dramatically. The secure and fast provision of large amounts of data, innovative applications and new virtual services is not only a major challenge for IT management. The skillset of procurement must also constantly evolve. For this purpose, procurement should be integrated into the processes at an early stage. Optimizing IT procurement pays off in two ways: in reducing the costs of hardware and software and in the efficient procurement of IT services. Thanks to our expertise, we can support you in this and, despite the market power of some manufacturers, achieve optimal conditions through individual service and price models.

 

Construction and Facility Management

Material scarcity, shortage of skilled labour, increased wages, and financing are just some of the issues that have hit the construction sector hard in recent years.

The speed of modernization initiatives has dropped with repair and maintenance first the mindset of many operations. Strength in procurement has never been more key to help counteract and control skyrocketing costs while in parallel ensuring we procure materials and plan projects with a lower environmental impact.

We help our clients navigate these challenges through:

  • Negotiating commercials and terms while ensuring compliance with regulations, project specifications and sustainability objectives
  • Identifying and selecting qualified contractors and vendors across fields and markets leveraging technology and automation in the procurement process
  • Planning and optimizing the acquisition of materials, equipment, and services for projects
  • Developing best-in-class budgeting and forecasting methods with accurate tracking across costs and timelines
  • Managing supplier relationships and risks through the project lifecycle

 

Marketing Procurement

 

The marketing spend landscape has changed drastically with the pandemic accelerating the shift in budget to digital channels such as social media and e-commerce and away from less effective traditional advertising.

An increased emphasis on big data and targeted marketing combined with increased spend is on capturing market share as the economy recover only intensifies the need for a more strategic marketing and procurement partnership and a more flexible and agile approach to sourcing.

With our extensive project experience, we help our clients:

  • Negotiate contracts to optimize performance measures and enhance return on marketing investment (ROMI)
  • Increase collaboration between marketing and procurement through a goal-oriented approach with clarity around value-add
  • Take the leap to engage new suppliers focussed on digital and challenge the status-quo
  • Elevate decision making with a data driven approach

Logistics & Indirect Services

Maximizing and improving operational excellence can be a vital component of competitive advantage.

Especially in today’s ever-changing market landscape affected by supply chain disruptions, trade instability, and the rise of digital operations, managing operational costs across central indirect services such as Logistics, Energy, and Indirect Materials (e.g., MRO) to drive bottom-line growth must be a key priority.

Done right, optimization of such services will contribute to reduced cost while simultaneously driving innovation, quality, sustainability in parallel to reducing your risk position and facilitate resilient supply chains. Thanks to our extensive project experience, we understand the market requirements, developed best-practices, and have most recent price benchmarks for all relevant commodity groups in indirect spend. To unlock the full potential, we partner with you to ensure transparency and establish state-of-the-art strategies to accelerate results while building customized capabilities to your unique needs.

 

Indirect procurement offers significant savings potential. With demand and tail-end spend management, it is possible to create the necessary transparency and monitoring across the company.

Jürgen Wetzstein, Managing Director, INVERTO – a BCG Company

 

Our indirect spend experts

Jürgen Wetzstein

Managing Director

contact@inverto.com Contact

Daniel Drylie

Principal

kontakt@inverto.com Contact

Find out more about our indirect spend expertise

INVERTO Magazines

When it comes to Capital Expenditures - CAPEX, there is often a lack of overview: Just as some things disappear in the Bermuda Triangle, companies mysteriously lose effort, efficiencies and lots of capital. What are the reasons for this? In our cover story, we take a closer look.

Client Case

The joint project focused on stabilizing the cost increases in indirect procurement at a low level.

Client Case

The focus was on optimizing the logistics network for both inbound, outbound and interplant transports.