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CFO Insights: Targeting procurement—Why CFOs should take direct aim at indirect spend

Published on: Nov 23, 2021

The procurement function has not lacked for attention in recent years. Even before the pandemic—with digitization experiencing a notable acceleration—traditional models of procurement were being upended by data-driven approaches to unlock value. Now, with cost reduction remaining high on their list of priorities, many chief procurement officers (CPOs) are feeling the pressure of ongoing efforts to boost efficiency.

Typically, CPOs are charged with delivering year-over-year cost reductions of three percent or more. But the toughest part of that challenge often lies less in hitting the target and more in navigating the methodology and trade-off agenda. As rigorous as the process may be, CPOs and CFOs may still be inadvertently overlooking a rich source of potential savings: indirect spending.

Despite the ongoing quest many CFOs have undertaken to turn the procurement function from a cost center into a source of value, optimizing indirect spend all too often is lower on the priority list. In this edition of CFO Insights, we’ll analyze indirect procurement and ask: How can CFOs and CPOs collaborate to gain control over such spending? Who should be accountable for bringing robust management to it? And why is this a propitious time for CFOs to take on this challenge?

This publication was released by our US firm.

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