Earlier this week, we shared a glimpse into the Spend Management Town Hall forum that took place at Michigan State University earlier this month. In this first installment of the Town Hall recap, CPOs from Kellogg’s and Whirlpool shared how the tightening global economy has caused them to retool many of their traditional supply chain strategies. One area both companies have refocused on is devising methods and policies to better understand and manage their company’s business services spending — from temporary labor to commercial printing to consulting and legal services.

Alistair Hirst, Vice President of Global Procurement at the Kellogg Company, began the dicussion on this subject by chiding the audience of procurement and supply chain executives, including himself: “When it comes to [services spend], shame on us that we’ve not really given it the same attention as other areas of spending. It is a huge amount of money when you look at it on a global basis. With inflationary pressures the way they are today, one can’t afford to ignore services spending anymore.”

Mark Brown, Senior Vice President of Global Strategic Sourcing at Whirlpool emphatically agreed: “It’s hard to find anyone that’s not assessing services spend right now.”

The panelists cited three critical components of a successful services spend management strategy:

1. Know what your spending: “It starts with good [spend] data management,” said Brown. “If you don’t have your arms around the data, it is really tough to manage services spend.”
2. Define and ensure the right policies: According to Brown, too many companies can’t answer a simple question: “What is your [services procurement] policy and how is it governed? Good governance and policy definition in this space is as important as anything else you can do.”
3. Forge tight links with the CPOs and the businesses: Hirst attributes the success of Kellogg’s services spend management program to aligning the procurement strategy with the financial and operational goals of the Finance department and the businesses. “We knew we needed the visibility to ensure that the CFO and the businesses could see real savings hitting the P&L,” said Hirst. “Otherwise we knew we would have failed.” MSU Professor Joe Sandor, the remaining Spend Management Town Hall panelist, agreed: “Everybody [in the company] has to have the accountability to have a world-class services supply chain strategy.” He noted that procurement should function as the trusted advisor to help the businesses with getting the most from their services spending.

In a coming post, we’ll examine how Kellogg’s and Whirlpool are managing supply risk in today’s volatile markets. In the meantime, listen to the podcast of the Spend Management Town Hall here. Or download the Spend Management for Business Services platform for additional best practices you can use today.