Is Indirect Spend Hurting Your Bottom Line?
Your Category Sourcing Plan Should Include Indirect Spend Programs
Managing your spend is an essential part of running a business. What comes to your mind first when considering costs? If you’re solely focused on raw material cost and employee salaries, you’re forgetting the impact of indirect spend. You may need to adjust your category sourcing plan with these programs in mind.
What Is Indirect Spend?
Indirect spend includes all the services and products you need to operate your business, aside from the raw materials and labor of the product you’re directly selling. For example, if you sell meals, your ingredients like chicken, beef, and produce would be considered direct spend. The money you dedicate to your restaurant’s facility maintenance or the DIRECTV subscription for your bar area is considered indirect spend.
Your indirect spend category sourcing plan can include programs that cover:
Pest control services
Armored car services
These services and products are often what sets your business up for successful operating. That’s why it’s important to take care when choosing programs.
Consolidating Your Indirect Spend
One of the major challenges of controlling indirect spend is its’ tendency to be handled sporadically. When business needs arise, your company takes care of them. However, this reactive strategy can mean that you’re wasting money. Indirect spend usually accounts for 13% to 20% of total spend. That means that cutting costs in this area can make a big impact.
Focusing on your category sourcing plan for indirect spend programs has several cost-saving benefits. Signing up for programs in advance gives you the time to compare prices and offerings. That means you’ll get the exact products and services you need at the prices that work for your budget.
You’ll also be able to provide more consistency across locations. When you have one supplier you source from for a specific product or service, you can trust that every location is up to standards. Lastly, taking the time to communicate with suppliers can help you build stronger company relationships that benefit your business as time goes on.
Taking the Next Step
If you’re ready to give your category sourcing plan for indirect spend programs more thought, you can rely on Foodbuy Foodservice for help. Whether you’re a GPO or consultative client, you can reach out to your account manager for help. They’ll help you discern which program switches make the most sense for your operation and begin there. Focusing on your needs is the ultimate goal.