Procurement Glossary & Terminologies
What is Maverick Spend ?
Any purchases that don’t adhere to the organisation’s defined procurement standards and procedures are referred to as maverick purchases. Maverick expenditure includes things like buying off-contract or from unfavorable vendors.
Maverick spending is between 25% and 80% of the total spending across all businesses. Maverick expenditure is still a minor leak from negotiated supplier contracts or, at worst, from uncontrolled, rebellious purchasing. It implies that you won’t be able to benefit from the offers and discounts you diligently sought for.
Primary Issues of Maverick Spending
Cost reduction is the top aim in procurement. Maverick expenditure causes two main problems: a loss of agreed-upon contract savings and risk of contract breach because of volume leakage. Therefore maverick expenses fail to take advantage of pre-negotiated prices or volume reductions to save money.
The organisation risks operational, supply, and reputational issues when purchasing from unlicensed or uncontracted vendors. Additionally, it might affect vital supplier relationships and source-to-pay processes negatively.
According to research by the Chartered Institute of Procurement & Supply (CIPS), maverick expenses can be responsible for up to 80% of all invoices at specific organisations, even large firms with procurement divisions. In essence, maverick purchasing amounts to unrestrained spending, which harms contract compliance and benefits realisation.
Tackling Maverick Spending
- Conduct a detailed spend analysis
It would be best to create a precise breakdown of how much you spend outside established contracts before attempting to reduce your maverick expenditure. To achieve this, you must analyse your spending in detail to ascertain where your money is going. Determine which team member’s suppliers and stakeholders are most responsible for the maverick spending. After then, evaluate the short-term and long-term costs. For instance, compare the prices in maverick expenditures to the amount you would have spent if you had followed contracts.
- Educate your team
Your team needs to understand where procurement fits into the whole picture before you can get them to participate in the procurement process. Everyone on your team must be aware of the following:
- You can reduce costs by using centralised procurement
- Maverick costs immediately impact the bottom line of your business
- Supplies acquired from unapproved vendors could be detrimental to your internal operations
- It can work if everyone does their share to ensure that centralized procurement runs well
- Adopt smarter procurement systems and processes
Your procurement procedure is only as effective as your available resources and techniques. It would be best if you did the following to improve your chances of stopping Maverick spending:
*Give your procurement staff strategic tools to speed up the procedure and facilitate collaboration with the rest of the organization. *Ask team members to point out any issues with the present procurement procedure. *Create more accessible procedures so teams and individuals may submit requests with ease. *Implement a buy approval procedure that allows procurement to review purchases before making them. This makes it possible for procurement teams to identify purchases covered by active contracts and make the most of them.
- Create a process for special purchase needs
No matter how well you design your systems and processes for procuring goods and services, there will inevitably be a few instances where you have to be prepared to meet a requirement without relying on a present vendor. There might be an urgent demand that your existing vendor can’t satisfy promptly.
To prevent situations where existing vendors cannot realistically meet the expected supply, it is best to design a basic escalation process that explains the measures to be taken.
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