PROACTIS Blog

The Procurement-Centric View of Spend Under Management – Only Half the Story

Charlotte Sutton
Charlotte Sutton,
PROACTIS
‘Spend Under Management’ is a term commonly used by procurement departments to measure and communicate their function’s impact on the organisation. The exact definition of this metric varies from company to company (and from consultant to consultant, and analyst to analyst), but it is generally defined as the percentage of an organisation’s spend that falls under some form of management by Procurement.
Because of this loose definition, we see wide ranges of percentages stated as ‘good’ levels of Spend Under Management – 80+% is usually considered to be the goal, but sometimes even 30% is considered good. That’s partly because‘spend’ can be defined in different ways – e.g. all non-payroll spend or addressable non-payroll spend. That difference certainly affects the equation. But the part that affects it more is how ‘under management’ is defined. Within procurement, the definition of under management can range from spend made within a rigorous category management process to cases where procurement has simply contracted a preferred supplier, whether that supplier is routinely used or not.

In any case, the procurement-centric view of Spend Under Management is only half the story of what counts to the organisation as a whole. Our purpose with this paper is to outline a much broader view of Spend Under Management – an organisation-wide view that goes beyond what the term usually means just within procurement to a view that clearly identifies all of the activities procurement, finance and the entire organisation must coordinate in order to achieve the ultimate goal of savings, efficiency and minimised risk.

To learn more, download our full range of Spend Under Management guides at proactis.com.
 
 
 
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