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WSJ Pushes Spend Management as a Recession Remedy

June 27th, 2008 · by Mark Clouse · 4 Comments · best practices, sourcing, spend analysis, supply management

A recent article on WSJ.com profiled how some companies have increased their spend management efforts in order to weather the economic downturn. For example, PPG trimmed their number of suppliers, negotiated better contracts and wound up saving 15%. GlaxoSmithKline cut T&E expenses by rolling out new online tools that show employees their various options for saving money on travel (thus ‘encouraging’ them to use common sense and save a few bucks on flights and hotels). And Diebold’s examination of their supply chain found they weren’t making use of group purchasing power with their suppliers, which once addressed saved them over 10%.

Certainly keeping a watchful eye on spend is always a prudent measure for businesses, but it’s particularly important during tough economic times. After all, if you can’t increase revenues, you better cut costs - a tall order given the “headwinds” we’re all facing in core commodities. As for increasing revenues - more on how spend management is helping grow the top line here another day. Regardless, no matter what direction the company’s financial ship is sailing, budget stakeholders are procurement staff will be asked to do more with less.

So how do you do that?

Well, as with any business problem, it’s about more than simply buying software and hoping for results. Across virtually all industries and spend categories, organizations still face touch challenges - the availability of decent data, the know-how to build winning supply strategies, and the ability to get the organization to change behaviors. The right tools are needed to be sure, but software alone will not post the kind of sustained results that leading companies like PPG, GSK and Diebold are driving.

Instead, what these firms and others are doing is driving comprehensive programs aimed at driving different behaviors, while balancing near-term and long-term results. They’re simultaneously investing in the tools, processes and people changes needed to improve access to spend, sourcing execution and back-end compliance. Think change management in order to achieve spend management.

I know that may sound a bit daunting. But given the alternative belt tightening options - and the ensuing disruptions to staff, budgets, offices, product lines, etc. - it starts to look the savvy, proactive move. After all, savings results in the short term AND sustained change in the long term is something every company needs to do sooner or later in order to be successful.

Mark Clouse is Vice President of Ariba’s Spend Management Services group.

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4 responses so far ↓

  • 1 spend chief // Jun 27, 2008 at 4:49 pm

    great post Mark, thanks. I hadn’t seen that WSJ article, but it is a good one. I thought I had seen something recently from fortune that was similar in the SM push. The recession is really fueling the fire for internal change and results, but a lot of companies (like mine) still have problems creating or freeing up budget for these types of projects. Is there a quick ROI calculation that can be used?

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