In a challenging economic climate, the performance of the procurement function is more strategic than ever. However, an insidious phenomenon can undermine their efforts: maverick spend, also known as rogue spending, off-process purchases, or unauthorised spending. These operations, made outside defined processes, escape the control of buyers. Whilst they may seem anecdotal at first glance, they have deleterious consequences and weigh on the overall competitiveness of companies.
Maverick spend: Definition
By definition, maverick spend refers to all those purchases that do not comply with the procurement policies, procedures, and processes established within the company. Disseminated throughout all departments of the organisation, they are often made urgently by employees. These could be ink cartridges for printers, bottles of water, tools, de-icing salt, etc.
These are generally goods and services that companies need sporadically and irregularly to function, but which do not directly form part of their core service offering. This is what we more commonly call long tail spend or indirect procurement. "For many companies, this type of purchasing is still not controlled and is sometimes completely invisible. It is not uncommon to find that 50% of indirect procurement is conducted in a maverick manner,"[1] explains Laurent Guillot, Managing Director of Oxalys.
This constitutes a real headache for buyers as they generally escape their control. It is therefore extremely difficult to identify and optimise maverick spend management. Indeed, more than three-quarters of companies consider reducing maverick spend as a priority.
Where does maverick spend come from?
Maverick spending happens much faster than one might think. Internal customers may not know the procedures in place, may not adhere to current procurement processes deemed too inefficient, or may even consider their own purchases too insignificant to have any impact.
Consequently, they approach non-approved suppliers, do not follow approved procurement channels, or fail to respect contract clauses. This sometimes even extends to purchasing from local shops, reimbursed through expense claims.
The main causes of maverick spend[2]
Sometimes, maverick spending also results simply from needs not covered by contracts established by procurement departments. Sometimes, there are simply no rules for certain product categories, whether intentionally or not. This is the case, for example, in multi-site companies with a strong decentralised culture. Internal users then end up sourcing autonomously.
Whatever the scenario, the result remains the same. When combined, all this maverick spend represents invisible expenditure, costs that are difficult to control, and various risks.
Maverick spend: what consequences for the company?
At first glance, maverick spend may seem harmless, or even necessary, to respond to urgent needs. However, their impacts are far from insignificant.
Spending out of control
Maverick spend too often escapes the control of procurement departments. Without consolidated data, it is difficult, if not impossible, to analyse this expenditure and integrate it into a global procurement strategy. Consequently, this represents spending that is not centralised, negotiated, or contractualised. This lack of visibility and management thus results in a significant loss of operational efficiency and financial savings.
High costs
Beyond the face value price, maverick spend concentrates significant hidden costs. Behind these many products ordered sporadically, there are as many transactions, expense claims, and deliveries to manage. When we know that the average cost of a transaction is valued between £19 and £95 - depending on the level of digitalisation - we realise that the potential savings are considerable. Ultimately, these are administrative costs that inevitably inflate the total cost of ownership of maverick spending.
Associated risks
Maverick spend can also expose companies to certain legal and/or compliance risks. By nature, maverick spending is conducted with suppliers that have not been approved, according to random criteria. In some cases, this can have serious consequences. This is the case, for example, with personal protective equipment in industry. This type of practice also opens the door to potential disputes when services are poorly managed.
Maverick spend: how to control it?
Three strategies are particularly favoured by companies to eradicate maverick spend. They have the advantage of addressing the root causes of this type of purchasing whilst representing interesting cost savings levers.
Optimising your supplier portfolio
Initially, it is appropriate to rethink your supplier panel. One can, for example, identify a reference supplier with an extremely broad offering of indirect procurement products. This allows better coverage of user needs who previously conducted their maverick spending with non-approved suppliers. Moreover, by concentrating volumes, the company can negotiate an overall discount with preferred suppliers and reduce its administrative costs.
Focusing on procurement digitalisation
Next, the digital lever is essential. And for good reason: equipping oneself with an e-procurement solution, particularly an electronic catalogue, provides users with a single platform to search for all products they need, applying the internal ordering process. Furthermore, digitalising transactions presents multiple advantages: better spend visibility and management, reduction in processing times, automation of certain low value-added tasks... but also especially optimisation of transactional costs - which can be divided by up to five!
Raising awareness among end users
However powerful and simple to use these strategies are, it is not enough to deploy them for maverick spend to disappear. In this regard, training and raising awareness among users about best practices is essential. It is important to regularly remind people of the procedures put in place and to clarify the issues surrounding maverick spending. It is by giving meaning to the rules established that we can succeed in influencing behaviours and encouraging team buy-in. For this, procurement teams need both the support of their management and a partner supplier capable of visiting and informing different stakeholders.
Maverick spend therefore represents a significant challenge in terms of procurement performance but also risk management and change management. For procurement departments, the challenge is clear: bring maverick spend under proactive control to transform it into cost savings levers.
[1] Laurent, GUILLOT (Managing Director, Oxalys), Décision Achats, January, 25 2024 [https://www.decision-achats.fr/Thematique/category-management-1229/Breves/Achats-sauvages-quels-leviers-face-a-une-gestion-qui-se-399998.htm]
