Despite having formal procurement processes, many organizations have staff members who continue to engage in ‘maverick spend’ practices—circumventing standard procedures to procure material from Suppliers who have not been formally approved by their Purchasing department resulting in higher material and purchasing process costs as well as inefficiencies in order processing and material delivery.
According to the American Productivity and Quality Center (APQC) Open Standards Benchmarking Procurement report, bottom-performing organizations have maverick spend practices which generate Purchase Orders worth 10% or more of their total annual procurement value, while top-performing organizations have maverick spend practices which generate Purchase Orders worth less than 1% of their total annual procurement value.
What APQC found was that order placement time and processing time actually improve with less maverick spend, resulting in lower Purchasing costs and faster receipt of materials. APQC found that organizations with higher levels of maverick spend require more than three business days to issue a purchase order to a Supplier vs. companies with less maverick spend requiring only five hours to issue a purchase order!
The report also states that organizations with more maverick spend have longer supplier lead times, on the average of 12 days compared to companies with less maverick spend having supplier lead times of only six days.
At ISS Group we deliver solutions which digitize business processes via our Process Digitization™ development and implementation methodology, such as our iPurchase eProcurement solution which streamlines your purchasing process, enforces adherence to approved procedures and compliance with corporate purchasing approval policies, and drives down purchasing costs and inefficiencies associated with maverick spend.