Not growth but spending tops Boardroom agenda

He outlines a context that should put Business Spend Management high on the agenda in the boardroom. “We have seen in the world in recent years a series of developments with great impact on the supply chain. It has long since ceased to be about the best price but primarily about availability.” The same applies to personnel. “The tightness in the labor market increases the urgency of digitalization. The trend has shifted from 'doing more with fewer people' to optimal use of the people who are still available. Wherever possible, you want to digitize tasks.” 

Added to this, not least, is the importance of corporate social responsibility. Companies are expected to ensure that their activities have no negative impact on the living environment and labor and human rights. “As an end supplier, you must be transparent about the creation of your products and accountable for them. Organizations may still be able to do that for their primary supplier but certainly not for what happens before that.” 

According to Tanate, this transcends the responsibility of Procurement, and these trends require a vision and strategy from corporate leadership. “An invoice is a sum of everything preceding it. It says nothing about the nature of the goods or the supplier. To make the right decisions, a holistic approach to Business Spend Management is necessary.” 

That starts with Sourcing, finding and selecting the right suppliers. “In doing so, you clarify what the competencies of suppliers are: financial, shareholders, production process, availability, performance, and so on.”

Proper consideration is followed by contracts and identifying (and keeping) possible alternatives. Finance must ensure that the organization orders within the contracts. Spend Analytics makes it clear to what extent that does or does not happen. “Based on availability, people within your company sometimes make the choice of supplier B, but there may be aspects of that that are undesirable. There are organizations where as much as 40 percent of spend is 'off-contract.' In this spending lies savings opportunities and therefore profit potential but at the same time also risks.” 

An organization easily has 10,000 suppliers, Tanate states. “That sounds excessive and, of course, depends on the size of a company. But go take stock of it; you'll be amazed,” he knows from experience. “About 20 percent accounts for 80 percent of expenses; those may be well in the picture. But that still leaves a tail of 8,000 suppliers. These seem quite unimportant, therefore not well managed, but can be risky.” 

It seems like a hopeless task to map it all out. “But with a BSM platform, this can be digitized just fine. Once it's data, you can do all kinds of things with that information.” He adds that ISPnext already has 400 customers in the Netherlands. “These all have ties to suppliers and their own ways of working. All those processes we know through and through. We can make that data work for you.” 

Understanding expenses is the basis for achieving better purchasing conditions. “But it encompasses more than simple savings,” Tanate emphasizes. “The extra dimension lies in the risks to and continuity of the business. Government, regulators, shareholders and customers demand accountability. Business Spend Management makes that possible.” 

This article was created in collaboration with Executive Finance.