Balancing the Procurement Spend Cost Equation: Indirect Spend

Cybersecurity threats, supply chain disruptions and delays, and the rise of AI have resulted in increased scrutiny of procurement processes and operations. The need for streamlined processes in manufacturing is now more critical than ever. Centralizing indirect spend is a key strategy for achieving these goals.

“Centralizing indirect spend with Amazon Business is not just about curbing rogue purchases; it's about creating a seamless procurement process,” says Brent Heller, head of manufacturing and industrials.

The Amazon Business 2024 State of Procurement Data Report revealed that nearly half (47%) of procurement leaders feel that their operations, processes, and tools are more complex than ever. With customizable tools and integrations with over 150 eProcurement systems, Amazon Business can help organizations centralize their indirect spend with robust spend controls, increased visibility, and measurable cost savings. Its smart business buying tools are designed to guide buyers through a controlled purchasing environment, reducing contract leakage and unauthorized spending.

Isidro S. Moreno, corporate administration manager at Azteca Milling, integrated Amazon Business with the organization’s SAP Ariba instance, calling the decision “a great solution for meeting our global corporate goals. We’ve replaced hundreds of one-time vendors, seamlessly brought Amazon Business purchases into our existing policies for compliance, identified preferred suppliers with Guided Buying (a Business Prime feature) to maintain our global contracts, and leverage robust analytics for budgeting and forecasting, among other benefits.”

Guided Buying is particularly beneficial for companies looking to standardize their procurement processes across various departments, ensuring that all purchases contribute to broader organizational objectives. Additionally, Amazon Business allows organizations to define and enforce policies that identify preferred, restricted, or blocked product categories or sellers.

The vendor consolidation process with Amazon Business is not a one-size-fits-all approach. Organizations have the flexibility to tailor their procurement strategies to meet specific needs, whether it's consolidating suppliers to leverage bulk purchasing power or ensuring that purchases adhere to their sustainability requirements.

For Ellen Nielsen, general manager of category management at Chevron, the most important factors are getting materials quickly, and for the best price. “We don’t want to handle thousands of suppliers and go through a bid process with each one, negotiating prices – that’s not a commercially viable approach. We’ve moved purchases to Amazon Business to consolidate spending in a dynamic store environment, where everyone can find what they need, and still take advantage of large-scale ordering and bulk buying.”

To help clients procure goods at the best possible price without sacrificing quality or delivery timelines, Amazon Business offers Request for Quote (RFQ). Instead of scouring multiple suppliers or settling for smaller quantities, customers can use RFQ to source the exact amount of materials needed. RFQ is also beneficial when customers expect a better bulk discount, simplifying the negotiation process by allowing sellers to bid for the business, incorporating discounts and competitive pricing in their offers.

“Our proprietary spend analysis tool gives organizations complete visibility into their distributed, off-contract tail spend across the enterprise. By aggregating this data, we can quantify the hard dollar costs of maverick spending like processing fees, missed discounts, and supplier management overhead.” says Heller. “This exercise identifies spend exposure otherwise unaccounted for due to transaction total and scale in most cases. As an example, one of our M&I customers had 335 cardholders across 4 business units. We ran a supplier analysis across a 12-month period and identified $110,425 in relevant spend estimated savings, including a $13,750 estimated savings in 15% trip reduction.”

By leveraging Amazon Business’s comprehensive suite of tools, including Guided Buying and RFQ, companies can achieve greater visibility, enforce compliance, and drive substantial cost savings. As companies continue to seek ways to balance efficiency with cost-effectiveness, Amazon Business provides the tools and flexibility necessary to achieve these goals, ensuring that procurement strategies align with broader organizational objectives and sustainability targets.

This article was originally published in Manufacturing Technology Insights.