Procurement teams need a balanced approach to fix maverick spend

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By: Amit Pratap Singh Rathore -- Lead Analyst, Preclinical Research

01 January, 2017

ARTICLE

Abstract:

Procurement is rising up in the priority list of both corporates as well as Governments.

The two foremost examples are:

a) In December 2014, the U.S. Governmenthas reported a reduction of more than $55 billion in contract savings in the fiscal year 2013 from the previous year. It was a part of a four-year decrease in the cost of Federal contracting.

b) Novartis, a global healthcare company has reported procurement savings of $1.6 billion in 2014 and expected to increase the same in 2015. ‘Strategic Sourcing’ has played a key role in the success of procurement teams in theabove mentioned cases. A dentin this key game plan is maverick spending.

Maverick spend can be defined as the purchase which is made out of the preferable route. These are ad-hoc purchasesmade outside anegotiated contract with a preferred supplier. This article discussesmaverick spending and countermeasures with respect to the pharmaceutical industry for a better picture. How much organization really loose?

Direct Capital Loss

Maverick spending is overspending. During negotiation, procurement teams not only negotiate the product prices but also work on other charges such as logistics cost based on the total volume of business. In case a buyer gets a deal from a new supplier which offers a comparatively lower price than the discounted price quoted by preferred supplier,then two things must be checked:

a) The additional costs such as logistics cost, material handling cost and quality assurance

b) Future relationship with the preferred buyer which is important in case of product supply shortage andreturn policies




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