The 5 essential measures to reduce Maverick Buying
Purchasing programs and measures will only have their full impact if the entire purchasing organization is pulling in the same direction. That is, when all procurements – even those made outside the purchasing department – are carried out within the structures provided for by purchasing. To put it even more concretely, this means that orders are placed with suppliers with whom Purchasing negotiates optimized price levels and conditions, that purchases are made from the product and service portfolios negotiated by Purchasing, that the ordering channels defined by Purchasing are adhered to, and so on.
Maverick Buying – not controllable procurement
The opposite of the just sketched is called Maverick Buying. It means, the uncontrolled, not co-ordinated and thus not controllable procurement within an enterprise. We meet it regularly, if departments buy materials or services arbitrarily, without including the purchase department. This results in the use of non-optimal purchasing prices and conditions, a lack of auditing capability, and the loss of negotiating leverage with actual strategic supply partners.
Measures to avoid Maverick Buying
Reducing uncontrolled spending in procurement is a recurring goal for our customers who want to optimize their purchasing processes, control costs and improve supplier relationships. Here are some of the key actions to address this challenge:
- clear procurement guidelines, responsibilities and procedures:
In our projects, the establishment of hybrid purchasing organizations has proven successful. Hybrid in the sense that the design authority of the fundamental purchasing and procurement structures, guidelines, strategic goals and measures (governance) is consolidated in a centralized department. The overriding goal here is to consolidate purchasing power, standardize processes and improve control over spending. This department is responsible for developing and publishing clear procurement policies and procedures that define the proper procurement process, from requisitioning to approving and issuing purchase orders to releasing invoices.
This includes efficient approval workflows that route purchase requests to appropriate staff for review and approval, ensuring compliance.
- User-friendly procurement systems:
Of almost fundamental importance to the functioning of such a hybrid organization is the use of user-friendly procurement software that simplifies the purchasing process end-to-end (source-to-pay) and makes it easy for staff to follow established procedures. An important keyword here is „Guided Buying“. The goal here is to simplify the use of procurement channels and structures desired by purchasing to the maximum – and to make the use of those not desired difficult or unattractive to the maximum. Digital supplier catalogs with negotiated prices and conditions simplify processing and support employees in their purchasing decisions. Spending outside of contracts can already be significantly minimized in this way. Automated approval workflows also ensure the 4-eyes principle.
Of course, there will always be „tail spend“ – the checkered lily of the valley. By this we mean the low-value, non-core purchases that are nevertheless necessary. The goal for this part of the spend is to provide an efficient process in the procurement system with defined framework conditions (e.g., an open marketplace with transparent price structures) in order to be able to evaluate and successively optimize the spend in the subsequent period.
- expenditure analysis:
It is precisely this regular analysis of spending data, also based on total spend, that first makes it possible to identify atypical spending patterns and their causes. This is used for strategic decision making.
- supplier management:
Building close relationships with preferred suppliers – and especially communicating in this regard – has already had the effect of increasing the focus on them by the demand side, using them more often, and thus increasing the leverage for further price negotiations. Regular evaluation of supplier performance. It is also helpful to establish compliance programs as part of supplier management that incentivize compliance with procurement guidelines and provide performance feedback.
- enforce compliance by tracking savings:
In essence, the measures described above can only be successfully implemented on a cross-functional basis. Engagement of key stakeholders, including senior management, is therefore critical to success in driving procurement compliance and emphasizing its strategic importance. Enforcing sanctions for noncompliance with procurement policies, including disciplinary action when necessary, is often cited as critical.
Our experience in doing so is different: Creating incentives and recognition programs to reward employees who consistently adhere to procurement policies is more promising. Motivation increases noticeably once goals become shared objectives.
Measuring and communicating cost savings achieved through rule-compliant procurement processes play a decisive role here.
In summary, reducing uncontrolled spend in procurement requires a multi-layered approach that includes clear policies, technology adoption, supplier collaboration and continuous improvement activities. The result is better control over spend, significantly improved compliance and – last, but not least – cost savings.
ADCONIA – beyond the ordinary
As Adconia GmbH, we advise our customers with the experience of more than 250 projects from more than 18 years – in questions around purchasing, supply chain and the digitalization of processes. Our goal is always to increase the profit contribution of purchasing through cost reduction, process automation or the qualification of our customers‘ purchasing teams.
With a correspondingly broad wealth of experience, precise knowledge of everyday purchasing and a high level of professionalism, our consultants carry out training measures at eye level. We do this – depending on the requirements – both as a sparring partner for specialists and managers with many years of experience and as a trainer for seasoned purchasing professionals and young professionals.