One of the fundamentals of procurement is to control spend, companies do this in a variety of ways (with varying wit and complexity) from implementing category management through to simply controlling who is allowed to add a new vendor to the MRP system.

Over at CIPS there’s a statement which reads “over 80 percent maverick spend is not uncommon”. Shocking eh? Perhaps not. Maverick spend can become truly rampant without the right controls and systems. Maverick spend matters because at the heart of the problem is a potential waste of spend, money that could be used for better things. But what’s the first step in getting to grips with this issue?

Get yourself a KPI of course.

At first glance, implementing a maverick spend KPI doesn’t sound too hard, does it? After all, you just have to place percentage spend on one axis and controlled vs uncontrolled on the other.

That’s where it gets tricky – how do you define maverick spend?

For example is your spend maverick in the following circumstances?

* Your buyer buys appropriate goods from an approved vendor for that category of spend
* Your buyer buys inappropriate goods from an approved vendor i.e. they buy a computer system from your stationery supplier.
* A buyer buys goods from an unapproved vendor but they are cheaper than you’d get from the approved vendor
* A buyer buys goods from an approved vendor which is approved for procurement within another spend category
* A buyer buys goods from an appropriate supplier within that category but buys product that is not approved (i.e. executive rooms from a hotel chain rather than standard

The truth is there’s a variation on a theme and organizations might have subtle interpretations on what maverick spend is for them.

Given these intricacies, one of the biggest problems in producing a maverick spend KPI is the level and interpretation of data. Sure you might be awash with data but as we can see from the examples above sometimes that data will need cleansing/refining in some form to be able to get reliable reporting.

Once you have the data and can produce your KPI it’s important to understand what behavior you want to drive from the results.

Of course taking control of maverick spend can bring about real monetary procurement savings, however, many procurement initiatives to control spend have an inbuilt weakness to ensure supplier contracts are used and one of the big problems here is in building up appropriate supply chain data.

It’s easy to report on spend by category but to get granularity on the coupling of spend, products, and suppliers require a level of granularity that many organizations simply don’t have.

Developing a Maverick spend KPI can deliver real benefit. However, it should be recognized that companies that fail to address the difficulties around data & supplier relationships can expect a blunt instrument in terms of fine detail.

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