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Five biggest areas of corporate spending waste

Is unnecessary waste happening on your watch? Understanding where and why waste occurs in your business is the first step toward preventing and eliminating it.

Overview

Indirect and related spend is big money, accounting for 15–30 percent of revenues for most companies, spanning everything from marketing services to logistics, to IT to travel and capital equipment.

Despite the large numbers, most firms do not manage their indirect spend professionally. In fact, our benchmark data shows that the average firm professionally manages less than 50 percent of spend, falling far short of best-in-class organizations that manage addressable spend at 90 percent or more.

This paper explores five areas where large amounts of waste often occur and their causes. Understanding the waste problem can enable companies to take steps to reclaim the margin point or more of bottom-line value that is wasting away.

Background

In the current market environment, companies are being asked to do more with less, and deliver margin expansion in a slow-growth economy. Business executives are searching every day for new areas of savings to tackle—but these same executives may not realize there is waste happening on their watch, right now across the organization.

There are three major barriers that prevent firms from mastering their indirect spend:

  • Limited Reach: Indirect spend areas are highly fragmented, requiring tremendously deep expertise to manage effectively and also to gain the trust of business stakeholders.

  • Information Asymmetry: Your suppliers know far more than you do, creating a drastic information imbalance.

  • Lack of Follow-Through: Negotiated savings tend to disappear between negotiation and the point of spending because of disconnected processes and poor tracking and visibility.

Key Findings

Accenture research finds five major spend areas from diverse industries with significant potential for reducing wasteful spend:

  1. Overspending on energy, especially in regulated markets.

  2. Wasting money on surgical benefits costs by failing to take advantage of medical specialization.

  3. Lack of benchmarking media performance and media spend.

  4. Not challenging fuel surcharges from transportation providers.

  5. Poor management of real estate costs.

Recommendations

Don’t let corporate waste happen on your watch. Understand the impact of the three biggest obstacles to effectively managing indirect spend—limited reach, lack of information, and lack of follow-through—and how these issues are causing waste in your business today.

These obstacles can be overcome with specialist procurement expertise, real-time market intelligence and integrated procurement processes. With the right set of expertise, intelligence and process, you can stop corporate waste in its tracks and start driving significant value for your firm.

Learn more about our capabilities:

  • Enterprise Energy Management and Procurement