A Day in the Life of a Procurement Maverick
Has this ever happened to you?
Procurement Manager (PM): Why did you not use our system to finish the order?
Procurement Executive (PE): I felt we could speak to the supplier directly, and process the order manually – it would save us some money, and I saved us 50% in this case.
PM: Well, that would be good if we did not spend over 3x trying to save that 50%.
Purchasing from vendors outside of established procurement policies is known as maverick spending. Off-contract spending or purchasing from non-preferred vendors are examples of maverick spending. Maverick spending accounts for anything from 25% to 80% of overall spending across all types of enterprises. These purchases may not have been made on purpose; some may have been made due to real errors or a lack of information. Maverick spending means you won’t be able to take advantage of the deals and discounts you worked so hard to secure. Maverick spending is small leakage from negotiated supplier contracts at best, and unrestrained, rebellious purchasing at worst.
Spend analytics and transactional purchasing system providers tout the reduction in maverick spending as a benefit of their products. In practice, maverick spending reduces the value of predicted sourcing benefits and may erode contracted suppliers’ trust in the buyer’s volume projections. While some ‘maverick spending’ is motivated by ignorance or rogue decision-makers, some stakeholders choose not to use preferred providers for valid reasons and knowing why ‘maverick purchasing’ occurs can provide useful insight into what stakeholders require and why.
How Do You Identify and Help the Maverick?
Enable Visibility into Spend Analytics
The ability to see where your money goes is crucial. After all, what you can’t see can’t be saved or fixed. Do you have any idea how much maverick spending costs your business? Or the non-conformity-prone job areas and budget categories? A thorough expenditure analysis can assist you in identifying gaps in all sources of spend data. You may then determine who, what, and where the problem is and devise a strategy to address it.
Enable Transition from Offline to Online Procurement
The majority of employees do not “go rogue” on purpose or with malice in their hearts. They may simply be unaware of the procurement procedure. Alternatively, people may find it inconvenient and time-consuming. Automation software can be daunting to staff who haven’t used it before. They may also notice lower pricing elsewhere, not realizing the costs of invoice and payment processing, as well as expenditure reimbursement. Regular efforts to explain the “why” and convey the value can go a long way toward garnering buy-in, whatever the cause. Consider organizing (bring your own) lunch and learn sessions, rewarding excellent department or individual successes, and allowing employees to propose vendors and provide feedback.
Choose a User Friendly Digital Procurement Solution
If you’re having trouble with your procurement process, consider using a more user-friendly alternative. On the market, there are numerous automated eProcurement systems that are both economical and simple to use. The goal is to choose a solution that is simple to use and all-encompassing (i.e., it tracks all direct and indirect spending) and interacts with your ERP system. This guarantees that all employees have timely access to the correct information.
Seek Feedback from Your Procurement Team for Continuous Improvement
Organizations are susceptible to procurement mavericks. A well-managed budget, planned procurement workflows, and improved departmental skills will assist organizations in successfully managing their spending and executing processes. In the end, noncompliance with procurement laws and maverick spending costs businesses a lot of money. You’ll gain a greater understanding of why maverick spending occurs, where it occurs most frequently, and, most critically, what solutions you should take to stop it by delving deeper into the purchasing experience and the obstacles and frustrations your employees face.
How Can Your Business Move Away from Maverick Procurement?
Data available from a large EPC company that employs 5000 procurement professionals shows that a switch from maverick spending to procurement automation has resulted in 80% time savings on the purchase requisition to purchase order cycle. To learn how your business can unlock new avenues of efficiency by moving away from maverick procurement to an integrated digital procurement solution, click here