Around these parts, the phrase “complex spend management” is tossed around frequently when discussing how the modern Chief Procurement Officer should develop their global programs and strategies. Today’s CPO Rising article is an overview of why the “hottest” complex spend categories (which have been historically linked to indirect spend management) must be critical focal areas for every procurement or strategic sourcing professional.
Although the budgetary numbers will absolutely vary depending on the size, scope, and industry of a particular enterprise, the fact is that, when added together under a centralized sourcing or spend management initiative, the totality of complex spend categories can comprise a significant portion of a company’s overall spend budget. For the purposes of today’s article, we’ll highlight the categories that are attracting the highest level of corporate attention: contingent labor, meetings / events, marketing materials / services, and business travel.
At its core, it is critical for procurement executives to address complex spend categories with a robust attitude that ensures that these areas are just as critical as other spend areas that have historically allured executive-level consideration. There are a few main reasons why the contemporary scope of complex spend management cannot be ignored:
- Budgets have been and will continue to rise within these areas. In areas such as business travel and marketing, budgets have been rising as enterprises pump more funds into these complex spend categories. While for some companies the economic downturn recovery period saw some lean years, budgets for most indirect spend categories are either at pre-downturn levels or fast-exceeding them. Procurement must ensure that their spend intelligence efforts and strategic sourcing initiatives are aligned effectively to attack these spend categories to maximize savings opportunities.
- Each category has a direct link to the success of corporate goals and initiatives. Just a decade ago, this statement wasn’t true. Business travel (and expense management) was a back-office series of processes instead of the value-add category it is today (business travel = an ideal link to fostering customer relationships and spurring new business development, not to mention the fact that cost reductions via expense management efficiencies). Contingent labor has evolved in such a way that the modern enterprise relies on contract talent (and its specified skillsets) to address critical project requirements. And, corporate events are no longer simple, one-shot events; in fact, they are true engagements that help enterprises better engage with customers, clients, and users, as well as help companies better-connect with existing and potential customers.
- The future is paved with complex spend management. This article should not be taken as a understatement of the importance of traditional spend management; the materials, components, and services that play into product development are just as important as they ever were, and there is no reason for procurement professionals to ignore their “basic training.” However, complex spend management is truly strategic spend management, as the efficiencies gained within these areas can help the greater organization prepare for the future from a financial management perspective. Talent forecasting, real-time visibility into travel and meeting spend, and alignment between marketing spend and company branding are all areas that can be positively affected by procurement’s approach to these spend categories.
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