Imagine the following scenario: You drive a company car, all expenses paid. Your company needs to reduce costs, so your boss requests that from now on, you do whatever it takes to pay the lowest possible price for gas.
You want to comply with your boss’s request, so you download an app that compares gas prices using your current location. A few days later, on your way to work, your gas light is aglow, so you pull into the nearest gas station. But then you remember your boss’s request. You check your new app and find that gas is five cents cheaper elsewhere. It’s ten minutes out of your way, but orders are orders.
A week later, same scenario, only this time, you’ve got to prep for an important morning meeting. Your app tells you the same thing: Gas is cheaper if you take a ten minute detour. This time, you ignore the app. And as you fill your tank, you rationalize internally, “It’s cool. My boss will understand when I explain that, with the salary I make, having me at work for ten extra minutes is clearly more valuable than saving eighty-five cents.”
Does your company encourage spend management detours that don’t make sense?
There are two common detours that defy common sense. Employees dedicate too much time to save too little, or they ignore sizable savings opportunities because they are perceived as too complicated. Most companies take both types of detours. And before they know it (and often without realizing it), they amass a massive amount of unnecessary spend.
Which begs the question: If these detours don’t make sense, why do they happen? Well, it’s complicated, literally. A recent study found that procurement decision makers alone use 13 different software platforms, online tools, and internal tools to manage indirect spend (Wakefield, 2015). It’s no wonder how the same study found that 98% of purchasing decision makers received a complaint about the procurement process.
Unfortunately, spend management detours that make little sense happen all too often:
- The person who booked the lowest priced lodging didn’t realize it would necessitate an extra hour of driving each day.
- An employee thinks they are purchasing something at the lowest price, but this particular online tool doesn’t surface negotiated rates, which are actually lower. With all the various negotiated rates, vendors, and systems, it’s nearly impossible for employees to understand what to buy, from whom, and which system or tool to use for each particular transaction.
- A procurement manager needs to order and ship goods for an off-site event. She uses different ordering systems, meaning she must also use different shipping systems. Not only does she overpay for shipping, she is also forced to check multiple systems to track each shipment in the critical days leading up to the event.
This way to smarter spend management.
The answer is simple: make it simple. By using one system for everything, and pulling information into a central location, employees can make the smartest decision instantly, with total confidence. Everything in the system is the negotiated price, the “within policy” price.
To discover a common sense approach to spend management, check out A New Hope for Employee Spend Management.