Battling dark purchasing: why transparency in procurement is critical

Utilizing the best technologies is essential for a well-run procurement department to support and further the success of an enterprise in the competitive global economy. When purchasing happens without a strong system of accountability in place, from innocuous office supplies to big ticket executive travel, companies can easily lose track of millions of dollars per year that could have been spent in a more efficient way. This phenomenon known as “dark purchasing” can easily be remedied by using cloud-based procurement software to keep track of a company’s purchases in a user-friendly and accessible way.

Get internal stakeholders on board

One of the first steps companies can take to fight dark purchasing is to clearly identify and assign procurement responsibilities within an organization. Internal stakeholders and departments need to buy into the importance of a transparent procurement process. Harnessing the power of vision-driven groups within the company can increase procurement’s access to company leadership to ensure the company benefits from the competitive advantage procurement intelligence provides. Procurement department employees should be given a consultative role early in projects; not just be used as a “blunt spear” after decisions have been made. Beyond utilizing internal resources, tapping the knowledge of outside procurement departments can help increase buying power by partnering for larger discounts.

Control indirect spend

Once internal stakeholders are on board, recognizing procurement’s role in controlling indirect spend is another important concept to understand in order to battle the effects of dark purchasing. When it comes to indirect spend, 20 percent of the company’s total spend involves 80 percent of the suppliers. It can be hard to manage the sheer number of vendors especially at a large company, but managing even small expenses in a productive way can really add up. In a report on tail spend, a smaller subset of indirect spend, consulting giant Accenture found that a billion-dollar company will waste about $15 million annually due to a lack of control. A good way to combat this is to ensure that procurement and AP become strategic partners to achieve enterprise goals. The good will and trust that is cemented between vendors and customers due to everyone having access to verifiable information at any time means fewer disputes, faster payments, and greater potential for captured discounts.

Data and analytics

It is essential to harness the power of data and analytics to measure success and ensure the company is staying on track to continue fighting dark purchasing. Using these tools mitigates risks for sourcing and supply chain changes, and digital systems enable greater visibility into procurement and help keep track of issues such as:

  • Which suppliers are the most reliable when it comes to deliveries and/or backorders?
  • Which suppliers are not compliant with contract terms?
  • How can I use this information to drive better negotiations next time?
  • How long is the spread between invoice receipt and payment?
  • Which suppliers have consistent pricing?
  • Am I over-purchasing some products and under-purchasing others?

Dark purchasing can usurp valuable company resources, but it doesn’t have to be that way. Digitizing the procurement process for an enterprise may seem daunting, but it is the most effective way to ensure spend stays on track. Easy-to-use outside services can ease implementation and help fight dark purchasing.

Dr. Reginald Peterson, a 20-year veteran of the supply chain industry, leads Corcentric’s indirect procurement services and works closely with businesses to better manage their procurement lifecycle to reduce cost and complexity. Prior to joining AmeriQuest, Mr. Peterson spent 16 years as a Senior Procurement Manager for Coca-Cola, and as a Procurement Manager of Indirect Materials for Siemens. He earned his B.A. degree in Economics from the University of Florida, a M.B.A from Kennesaw State University, and a Doctorate in Supply Chain Management from Walden University. He is based in Atlanta.