Indirect purchases cover everything a company buys to operate but does not resell or build into its products: facility services, IT, travel, temporary staff, consulting, maintenance, office supplies, telecoms and more. These categories are often spread across many budgets and many people. That is precisely why they hold savings that nobody has looked for.
Reducing indirect costs is not about cutting everything by the same amount. It is about understanding what you buy, why you buy it and under which conditions. Here is the method we apply.
1. Get visibility on spend
You cannot manage what you cannot see. The first step is a spend map built from accounting and purchasing data: suppliers, amounts, categories, buying entities and contracts. In many companies, this exercise alone reveals surprises: the same service bought from several suppliers at different prices, contracts renewed automatically for years, purchases made outside any agreement.
The data is rarely perfect. That is not a reason to wait. A first map, even approximate, is enough to identify the categories that deserve attention. It can be refined along the way.
2. Prioritise the categories
Not every category deserves the same effort. Rank them by combining a few criteria:
- the weight of the spend;
- the potential for improvement, for example a fragmented supplier base or old contracts;
- the ease of action, depending on contract end dates and internal constraints;
- the risk for operations if something goes wrong.
Start with a few categories where the potential is clear and the risk is low. Early results build credibility for the rest of the programme.
3. Work on demand before working on price
The most durable savings often come from the need itself rather than from the supplier's price. Questions worth asking for each category:
- Do we need this level of service everywhere, or can we adapt it by site or by use?
- Are specifications based on real needs or on habits?
- Can we reduce volumes, frequencies or the number of references?
- Who is allowed to order, and through which channel?
This work requires close cooperation with internal clients. It is not about imposing restrictions but about agreeing on the right level of service.
4. Put suppliers in competition, properly
Once the need is clarified, a structured consultation is the most effective way to obtain the right price and conditions. A good consultation relies on a clear specification, comparable offers and transparent evaluation criteria. It also takes into account the total cost: price, but also service quality, logistics, payment terms, invoicing and the cost of switching supplier.
Negotiation comes after the analysis of the offers, not before. It is better prepared when you know your alternatives and the points that matter most to each supplier.
5. Secure the gains in the contract
A good negotiation lost in a vague contract is a wasted effort. The contract must capture the prices, the indexation rules, the service levels, the penalties if relevant, the duration and the conditions of renewal. Make sure that the agreed prices are actually loaded in ordering tools and checked on invoices.
6. Follow up over time
Savings fade if no one follows them. Set up simple monitoring: regular reviews with key suppliers, checks of the prices invoiced, tracking of purchases made outside contracts. Renewal dates should be anticipated well in advance so that each expiry becomes an opportunity rather than an automatic extension.
Common pitfalls
- Focusing only on price and degrading the service, which creates hidden costs later.
- Launching too many categories at once without the resources to follow them.
- Forgetting internal clients, who then bypass the new contracts.
- Announcing savings that cannot be traced in the accounts.
How we can help
Our consultants support procurement and finance teams on indirect categories: spend mapping, prioritisation, needs analysis, consultations, negotiation and contract follow-up. We can take charge of a few targeted categories or reinforce your team on a broader programme.