The Basics of Spend Aggregation in Procurement

Streamlining spend management is one of the fastest ways to reduce tail spend and improve financial visibility. Spend aggregation can greatly improve efficiency.

Spend aggregation—how can it help your company? When you serve several departments or locations around the world, how can you centralise your spending?

This requires the correct logistics and software. Companies can centralise their purchasing and enhance profits and brand value with a well-planned aggregation programme.

It may centralise purchasing, decrease expenses, and unify procurement throughout your firm.

Spend Aggregation

Spend aggregation streamlines your organization’s vendor transactions among a few vendors. Aggregation can involve merging buying for multiple departments or across many locations.

By lowering the number of suppliers and ordering frequency across corporate locations, you can enhance procurement efficiency and lower spend management costs.

Why is it Important?

Organisational disaggregated spending makes procurement much more complicated. Spend aggregation can improve value creation and reduce costs in your procurement business.

Spend aggregation simplifies firm procurement and payment logistics. Reduce supplier partnerships and simplify ordering across sites to eliminate paperwork.

Spend Aggregation Benefits

Departments save money and time when they completely utilise expenditure aggregation:

Better spend optimisation: Aggregating procurement spending is usually done to cut costs and improve supplier negotiations. Centralising procurement and using fewer partners boosts contract value. Larger clients that combine supply demands from multiple locations receive better price from suppliers.

Improved logistics: Centralising procurement across locations offers various benefits. When all sites use the same vendors, logistics costs and issues decrease. Consolidating supply orders across sites equalises product quality. A consistent experience across brick-and-mortar stores benefits the brand.

Strengthening supplier relationships: Working with a few high-volume suppliers improves bottom-line results. Buyers should expect better consistency from a single major customer, while suppliers can expect steady revenue. Strong vendor relationships reduce risk and strengthen supply chains.

Increased procurement value creation: By decreasing the repetitive tasks and busywork of acquiring and paying for commodities from a vast network of vendors, procurement may focus on improving other organisational processes. This helps procurement save money and increase value.

Implementing spend aggregation

1. Find champions

Spend aggregation is extensive. Procurement departments that aggregate spend often face challenges and internal friction. Spend aggregation alters many procurement methods, therefore a high-level advocate can help you navigate and accept the changes.

2. Centralise data

Centralising all procurement data in your organisation is key to expenditure aggregation. Centralising data on a platform is the best way to track departmental or location spending. Implementing spend aggregation is additionally difficult due to data centralization. Assign a dedicated point person to implement this process.

3. Streamline supplier lists

Reducing your supplier list helps you aggregate spend across departments or locations. By consolidating purchasing with a few carefully selected, higher-volume suppliers, you decrease bills, accounting, and legal approvals and improve pricing and terms.

4. Streamline approvals and communications

By centralising your purchasing process and communicating with divisions, you may optimise spending by improving decision-making and approvals. This simplified technique eliminates delays caused by departmental miscommunication.

5. Use risk management

Trust is essential when aggregating spend with a few major vendors. Consider third-party risk mitigation if your company does not have a risk management programme. This may involve incorporating risk management into your partnership agreements (such as only working with ISO-certified suppliers), using a vendor questionnaire to assess risk, or increasing supplier sourcing and negotiation due diligence.

6. Oversee suppliers

Tracking vendors’ performance is crucial when you have limited contracts. Supplier lifecycle management ensures long-term supplier performance and contract compliance.

7. Assess and improve procedure

Spend aggregation is complex and evolving. Continuously improve your expenditure aggregation process using supplier management and spend analysis data. This data will identify cost-saving potential, supply chain strengths and weaknesses, and department or location-wide purchasing consistency.