Procurement professionals face growing pressure to add more business value, with the majority stating cost reduction as a focus area in the coming year. Seventy-nine percent of procurement executives said that cost reduction is their top priority for 2017, according to Deloitte’s 2017 Global CPO Survey of 480 chief procurement officers from 36 countries.
In an effort to drive additional value for their organizations, many purchasing leaders are turning their attention to spend consolidation.
Indirect spend is an area ripe for consolidation, where spot buys and unplanned purchases can drive up costs related to rogue spending and supplier management.
Optimizing indirect spend has the potential to reduce costs by up to 25%, according to projections by EY. One way to reduce indirect spend is to utilize a real-time marketplace for procurement. Such marketplaces provide a broader selection of products and suppliers, which allows for real-time pricing competition.
The typical purchasing process exacerbates indirect-spend problems by relying on myriad supplier relationships with pre-negotiated pricing and contracts. Hackett Group reports that managing supplier information and relationships costs between $700 and $1,400 annually per supplier. Contracted suppliers can drive compliance and efficiency, but limiting competition and selection leads to a sub-optimal purchasing experience for employees. Another downside of limited selection is rogue or off-contract spending, which can lead to compliance issues and a lack of visibility into purchasing.
A real-time marketplace like Amazon Business provides an alternative to the traditional indirect procurement model that gives users true comparison shopping that aligns with corporate purchasing processes. Here’s how Amazon Business can help purchasing teams bring more value to their organizations by optimizing indirect spend:
Dynamic pricing model for tail spend purchases
Because Amazon is a dynamic marketplace, users are able to view products and the best prices in real time, as opposed to traditional procurement, which limits selection and locks in prices. With millions of sellers on Amazon.com, users can search, select and order business products based on price, reviews and supplier preferences.
Greater efficiency for procurement teams and buyers
Amazon simplifies shopping for consumers by providing a broad selection of items from a variety of sellers at competitive prices. Businesses get the same shopping experience with Amazon Business, along with the added benefits of business-only products, quantity discounts and purchasing system integration.
Increased compliance and visibility
Amazon’s vast selection can help reduce off-contract spend and fraud by moving spend into an approved channel. Amazon Business also improves spend visibility with our new analytics tool.
Learn more about how you can optimize indirect spend with a real-time marketplace like Amazon Business.