Creating a culture of spend optimisation



CultureOfSavings.jpgSpend management evolved from a technology perspective when it was realised that organisation-level purchasing required a separate and unique set of tools that could set it apart for improving efficiency and gaining deeper insight into spend.

While spend management has expanded into other areas of the supply chain, it is still focused on controlling spend related to operating costs and lacks an ability to promote procurement into a strategic role within organisations.

Consequently, an evolution of spend management is occurring - a new concept coined “spend optimisation”.

Where spend management focuses on improving the performance of the procurement function, spend optimisation seeks to expand the culture of savings to the rest of the organisation through a combination of people, process and technology.

However, transitioning traditional spend management towards spend optimisation is challenging.

From a spend management perspective procurement is focused on reducing cost and its value is based on how well an organisation can source, acquire and pay for goods and services; few organisations have bought into the idea that procurement can become strategic in its ability to identify new revenue or profit opportunities.

In fact, Aberdeen research indicates that regular achievement of savings targets is considered procurement's primary contribution to the organisation, over the identification of new revenue opportunities.

Therefore, to be an agent of change procurement organisations need to charter a message beyond a cost-centric mindset - one that translates procurement's contribution into a value-add to the organisation and a 'profit centre': procurement organisations must become agents for a frugal culture, promoting spend optimisation within the organisation and giving reasons why spend needs to be optimised.

Which begins with building the support of the executive leadership.

Given the reporting relationships found in most organisations CPOs alone cannot promote procurement’s value. Aberdeen found that the majority of procurement leadership reports directly to a C-level executive role rather than having its own seat at the proverbial table: CPOs report to either the CFO (25%) or the COO (29%), with only 17% reporting to the CEO.

As a result, spend optimisation can only become a reality if those in the executive office are willing to help promote the concept. So involve them - procurement's view of spend optimisation must visible at the executive level before executives will buy into procurement's vision of success or communicate procurement's value to their teams.

However, the transformation to spend optimisation must begin within the procurement organisation itself. But while CPOs need to prepare their teams with the right tools and knowledge that help relay the value of procurement to peers such as Finance, HR, IT and the supply chain, many procurement organisations are ill-equipped to meet this challenge from the top down.

Aberdeen research found that the top barrier preventing organisations from better aligning their procurement strategies with organisational objectives is a lack of appropriate skills or knowledge: while best-in-class organisations are ahead of their peers in traditional procurement areas (understanding the importance of commodity/category and the ability to work with legal contracts), they require increased training in areas that relate to the wider business functions, such as finance, product development and sales.

This suggests that developing the right procurement team requires recruiting new talent from broader business backgrounds, with formal education (i.e. MBA, CPA), to assist the procurement team's efforts to broaden skill sets to better understand the needs of the wider organisation and develop the right message to cater to them based on this knowledge.

Another key step in achieving spend optimisation is centralising control of policies and procedures – specifically a centre-led model, owing to the flexibility this model provides.

Structural deficits in the way procurement has traditionally been organised often impede efforts that could create a common culture for understanding its value; many procurement organisations are unable to create a consistent flow of procurement decisions or processes down to a local level necessary for achieving spend optimisation.

A centre-led approach to procurement provides an easier way to manage disparate locations while providing procurement staff the freedom and flexibility to make purchasing decisions based on local knowledge and regional requirements.

In a typical “centre-led model” areas like sourcing and buying power are managed from the top down through the establishment of centres of excellence, while executing transaction-intensive activities, such as the issuance of purchase orders and invoice processing, is done at the local levels.

Finally, while broadening the reach of procurement through the CPO, executives, and wider organisational support are all necessary steps for creating a culture of spend optimisation, translating it into process and making the message stick requires the glue to hold it all together: the right technologies.

Since most users’ interact with procurement for through technology and not through the CPO, the e-procurement platform becomes the main channel for communicating procurement's values and culture.

Furthermore, technology needs to represent the here and now for end users to want to adopt its use. Based on global access to recognised consumer applications (i.e. Amazon) and search engines (i.e. Google) combined with the proliferation of smart phones and tablets, end-users of enterprise technology are increasingly expecting these same elements at the workplace, such as a cloud framework that promotes ease of use, anywhere-access and consistency.

In conclusion, while consolidating all e-procurement under a common platform increases the chances of user participation and sends a more concise message for improving adoption and for creating an organisation that optimises spend, using the right e-procurement tool is critical to the success of a culture that embraces procurement rather than ignores it.

Leave a comment



Career opportunites


  • <500 000 Gauteng Operations, Planning & Inventory Supply Chain
Are you looking for new career opportunities as

Procurement Specialist

  • >500 000 Gauteng Procurement Officer / Specialist Strategic Sourcing Supplier / Business Development
As a specialist Supply Chain recruiter, I am

Logistics Controller

  • <500 000 Gauteng Logistics & Warehousing Procurement Officer / Specialist
Seeking dynamic up and coming candidates looking for

Supply Chain Manager

  • >500 000 Permanent Procurement Management Supply Chain Western Cape
As a specialist Supply Chain recruiter, I am

Business Process Specialist

  • <500 000 Gauteng Procurement Consultant Procurement Officer / Specialist Supply Chain
A company within the financial services sector is

LOC Procurement Manager

  • Gauteng Permanent Procurement Management Procurement Officer / Specialist
Your Responsibilities: Job Purpose To be the interface ...More

Account Manager

  • >500 000 Procurement Officer / Specialist Supplier / Business Development Western Cape
Key Performance Areas:• To ensure that all aspects


  • >500 000 Gauteng Procurement Consultant Strategic Sourcing Supply Chain
Key Performance Areas:• You'll be concerned primarily with

Commercial Buyer

  • <500 000 Buyer Contracts Procurement Officer / Specialist Western Cape
A well-known Mining company is seeking the services

Technical Buyer

  • <500 000 Buyer Contracts Procurement Officer / Specialist Western Cape
A well-known Mining company is seeking the services

Business Development Executive

  • >500 000 Gauteng Supplier / Business Development
A retail solutions company is seeking a New

Financial Manager

  • >500 000 Contract Operations, Planning & Inventory Procurement Management Western Cape
Looking for an unemployed CA (SA) in Cape

Chief Financial Officer

  • >500 000 Gauteng Operations, Planning & Inventory Procurement Management
An exciting opportunity exists for a CFO with

Procurement Consultant

  • >500 000 Gauteng Procurement Officer / Specialist Strategic Sourcing
Key Performance Areas: A profound knowledge of sourcing

Commodity Specialist: IT

  • >500 000 Commodities Gauteng Procurement Officer / Specialist
Key Performance Areas:• Effectively applies acquired technical/functional skills

Senior Consultant

  • >500 000 Gauteng Projects / Category Management Supplier / Business Development
Key Performance Areas:• Adheres to best practice processes

Logistics Manager

  • >500 000 Gauteng Logistics & Warehousing Operations, Planning & Inventory Procurement Management
Key Performance Areas:• Manage warehousing and distribution 3PL's

Head of Franchise Network

  • >500 000 Contracts Operations, Planning & Inventory Western Cape
The opportunity to work for a multinational retail

National Driver Manager

  • >500 000 Analyst Contracts Logistics & Warehousing Operations, Planning & Inventory Western Cape
The opportunity for an extraordinary individual to join

Commodity Specialist: Industries

  • >500 000 Commodities Gauteng Procurement Officer / Specialist
Key Performance Areas:• Under the guidance of the