Revolutionising indirect procurement for the 2020s

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There’s a new vision for indirect procurement, enabled not just by new technologies but also by a radical new understanding of the value indirect procurement can generate.
Since 2011, indirect spend has been growing by an estimated 7 percent per year globally. Even so, many organizations fail to give indirect categories the attention they deserve.

Common challenges are apparent across industries. Spending is often fragmented among multiple locations, business units, and categories, making it hard to identify and capture enterprise-wide savings opportunities. Leaders of indirect-procurement functions typically lack sufficient clout within the organization to obtain the technology and talent they need. And most companies do not have mechanisms to monitor indirect categories and reflect their performance on financial statements.

To overcome the challenges, companies need a new vision for indirect procurement that combines cutting-edge tools and practices, as well as traditional approaches to category management, to address fundamental issues relating to processes, capabilities, and data. Using this coordinated, technology-enabled approach, global companies are already achieving marked improvements that allow them to capture the untapped value of indirect procurement.

Simply put, evolution is not enough. To succeed in the 2020s, companies need a revolution in indirect procurement.

The distinctive elements of the new vision

What makes the new vision for indirect procurement so powerful? Certainly, digital technologies and best-in-class practices provide the foundation. But these are just the starting point. To unlock the full potential, these elements must be applied comprehensively (exhibit). In the Appendix, we set out the differentiating features of each element of the approach. Here, we describe the most advanced solutions relating to each element.

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Authors: Pierre de la Boulaye, Mauro Erriquez, Manuel Gener Bago, Patricio Ibanez, Raul Santos, and Alfredo Vaghi
Date: April 2019
Source: https://www.mckinsey.com