The iQuantum Equation

Maverick Spend

As one of the elements iQuantum focuses on in our day-to-day business with clients, the concept of “maverick spend” has led our team of engineers to develop a centralized procurement and purchasing process…one in which the leadership dashboard provides leadership teams complete visibility when analyzing direct, indirect and maverick tail spend. What’s more, it gives buyers access to approved and vetted suppliers, complete with negotiated discount rates to reduce such spend.

We here at iQuantum understand that controlling mav spend is a challenge for finance and procurement professionals because it results in reduced cost savings. Further, it leads to cost savings leakage and prevents sourcing teams from fully realizing the cost savings associated with a negotiated contract, and increases operational risk when employees are purchasing from unauthorized non-approved, non-compliant vendors.

It can also lead to additional risk and increased process cost, which can ultimately result in additional work for purchasing departments and the Accounts Payable team when setting up and paying unapproved vendors.

Though many of our clients may have well-defined policies, some management entities in their operation would rather negotiate their own contracts and pricing without procurement involvement – and this could be occurring for a number of reasons, from a lack of understanding the process to an individual simply not caring about the defined sourcing process.

The MRO Factor

In the recent challenging times, demands are fluctuating and margins are getting thinner across a whole host of industries, and as such, procurement organizations are formulating strategies to mitigate the risk of out-of-control supply problems and price hikes. In these situations, mav spend can obstruct a company from hitting its cost-savings targets.

There are various aspects of maverick buying/spend that pertain to MRO (Maintenance, Repair and Operations), but the biggest factor iQuantum analyzes on a regular basis is why it’s overlooked…and why managing it is considered a very valuable tactic.

Compared to the procurement of ORM (Operation Resource Management), Maintenance, Repair and Operation deals with a larger number of orders in which the quantity per order varies from a single unit to thousands of units. The bottom line is that Maintenance, Repair and Operation providers are playing a significant role in today’s somewhat turbulent supply chain management.

Often considered a non-core factor, ineffective Maintenance, Repair and Operation processes bring with them significant risks, including, amongst others:

  • Unplanned equipment downtime
  • Stock-out of mission-critical parts
  • High freight cost
  • Frustrated stakeholders

Not only does this affect fulfillment, but poor Maintenance, Repair and Operation management can impact internal business areas as well. In fact, industrial buyers who neglect their Maintenance, Repair and Operation spend can lead their organizations into chaotic maverick spending – and spare parts wastage.

Where We Come In

The top three common reasons for mav spend in any organization is:

  • Decentralization
  • Lack of standardization
  • Heavy indirect spend

iQuantum’s procurement trifecta approach allows organizations to boast a centralized procurement and purchasing process, with a leadership dashboard that helps companies analyze their direct, indirect maverick and tail spend. What’s more, when it comes to lack of product standardization – a very common problem amongst MRO products or high volume, low spend items such as screws and gloves – iQuantum’s normalization process helps categorize all products and services under common company code, thereby helping minimize mav spend.

Since indirect spend is spread across multiple categories, it is hard to implement standardized processes and control, all of which can lead to higher mav spend. In response, iQuantum automates indirect spend analysis with accurate allocation factor calculation, yielding a tighter control on indirect spend management.

There are a plethora of benefits that come along with controlling mav spend, with just as many ways of controlling it. Download the case study on this page to see how iQuantum helped a particular customer identify their mav spend and realize savings.

 

Introduction
The MRO Factor
Where We Come In

Related Posts