Energy & Utilities
Waste & Recycling
Pest Control
Uniform Rental
Stop Overpaying for Your
Services
Facilities Management
Security & Guard
Complex Indirect
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Retail procurement teams have experienced a necessary transformation as a result of overburdened and understaffed stores. First perceived as transactional units with a focus on sourcing and negotiating contracts, they are now transitioning from a once tactical approach to more of a strategic one.
Traditional Procurement
Reliance on dwindling internal resources to manage suppliers
Modern Procurement
Engagement with third-party experts and technology to manage suppliers
Indirect Spend Procurement
Energy & Utilities
Waste & Recycling
Pest Control
Uniform Rental
Facilities Management
Security
& Guard
The Pain Points Plaguing Procurement
2007
Sufficiently staffed;
$30MM
in supplier spend per category manager
Many industries are facing similar challenges with overburdened and understaffed teams, especially as post-pandemic aftershocks still plague the market.
2024
$100MM+
Department leaned out;
in supplier spend per category manager
BASELINE
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YEAR 5
INDIRECT SERVICES ANNUAL SPEND
The Indirect Expense Roller Coaster
While managing indirect expenses starts with a simple goal — to find the optimal cost level and stay there — the routine is more complex, often resembling a roller coaster where:
Procurement negotiates a new contract every few years, then quickly moves on to other higher-priority projects with minimal post-deal expense management.
The unproductive cycle continues every 3 to 5 years.
Procurement is only emphasized and rewarded for projected “savings” in the first year.
Those projections are often flawed and may not materialize, even in year one.
In categories involving multi-year contracts, years two and beyond see even higher spend increases, typically escalating 8% to
12% per year.
Procurement negotiates a new “good deal.” Suppliers again take advantage of procurement's shifting focus post-deal, and prices steadily rise for the rest of the second term.
Click on the dots below
There are best practices and services to address the complexity of managing indirect expenses that result in cost savings and Spend Reduction.
How to Better Align with the Bottom Line
Recent McKinsey research points to businesses refocusing their attention on efficiency measures, with more than one-third of respondents listing efficiency as a top-three organizational priority.2
“Boosting efficiency is about more than managing immediate crises or getting the same work done with fewer resources. Deploying resources more effectively to where they matter the most promises substantial benefits, including improved organizational health, higher shareholder returns, and better and faster decisions.
Being efficient often means placing more trust in your organization and empowering employees.” — McKinsey2
For procurement teams, this means taking the essential steps to implement an innovative and P&L-focused expense management strategy that:
Tracks true normalized savings for the entire life of contracts.
Aligns procurement with actual P&L savings instead of single-year projected savings.
Allows for control of your spending data and has a process to continuously maintain, clean, and improve.
By re-aligning the procurement department’s processes to the company’s bottom line, escaping the unproductive indirect expense roller coaster will not only increase efficiency but allow procurement to focus on other important tasks like more cost-saving strategies.
The Ideal Process for a Best-Practice Solution
Data Collection
Program Assessment / Implementation of Measurement Tools
Strategy Setting
Sourcing / RFP Processes and Supplier Negotiations
Recommendation / Implementation
Ongoing Management / Program Optimization
Click on the steps below to learn more
Looking across the board of retail, food service and grocery industries, there are similar pain points of inflation or margin-grabbing tactics happening (i.e., waste & recycling contracts).
What’s more, the business typically touches upon multiple teams that may be siloed. For example, in a typical indirect expense scenario, procurement first gets and signs the contracts; the operators come in and deal with suppliers; and, finally, the finance team (i.e., accounts payable) is tapped to pay the supplier.
The ideal solution process to address these challenges is nose-to-tail, including:
Program Assessment /
Implementation of Measurement Tools
Line-by-line baseline cost assessments for all accounts
Audit against existing agreement
Strategy Setting
Ensure the plan is on target
Agree upon overall account strategy and course of action
Sourcing / RFP Processes and Supplier Negotiations
Source qualified suppliers based on industry expertise
Manage RFP processes via proprietary technology built around the unique characteristics of the industry’s leading suppliers
Recommendation / Implementation
Collaborate to finalize decisions
Manage contract implementation processes pending authorization
Ongoing Management / Program Optimization
Line-by-line monthly audits
Initiatives to enhance programs
Customized reports
How overburdened and understaffed convenience store teams
— from procurement to category managers to finance —
can turn complex indirect costs into savings
Managing indirect expenses might take some time to optimize, however, doing so has lasting benefits to the organization. Here is a real-world case study that puts the aforementioned strategies into action:
Making the Case for Optimizing Indirect Expense Management
A large grocery chain inherited two main hauler agreements and multiple locally sourced and negotiated deals in both rural and remote markets.
The grocer leverages Fine Tune to assess the contract, implement measurements and find cost savings for the grocer while consolidating the contracts.
Result: The two main hauler contracts were negotiated and implemented, while Fine Tune also managed the supplier transitions of nearly 100 stores, resulting in:
Managed Costs. Minimal Effort. Measurable Savings … that Sticks.
“Leading consultancy and services firms are blending procurement outcomes with digital-enabled delivery models. We’re excited to cover this market to help the Global 2000 make more holistic solution decisions, incorporating a diverse set of strategy, operations, technology and BPO partners.” — Jason Busch, Founder, Spend Matters 3
Data Collection
Any and all current contracts
Recent invoicing for all accounts
Click to Learn How to stop overpaying for your services today
Sources:
1- Procurement Foundry, "Watch out for these "scary" indirect supplier practices hurting your bottom line"
2- McKinsey, “The State of Organizations 2023”
3- Spendmatters.com, "What kind of service provider should you use for procurement digital transformation?"
“Savings” rewarded based on projections
“Low hanging fruit” savings initiatives
Indirect categories on “autopilot”
Unit cost focus
Savings rewarded based on results
More strategic solutions for lasting, positive P&L impact
Dedicated and vigilant supplier expense management
Focus on supplier industry cost models
Read the full case study
Fine Tune has evolved over 20+ years in business to its position as the nation's preeminent consultancy relative to the most complex and burdensome indirect service categories.
Fine Tune empowers its customers by optimizing their most complex indirect expense programs to maximize savings. By solving the most persistent indirect expense problems, Fine Tune enables businesses to achieve results they didn’t know were possible, while allowing their teams to focus on other priorities.
About $750,000 in savings for the grocery chain
40% of those savings were secured specifically through continuous auditing and program management post-implementation
Overall, the grocery chain saved 30% off its bottom line
(866) 946-TUNE (8863)
Contact@FineTuneUS.com
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BASELINE
INDIRECT SERVICES ANNUAL SPEND
Facilities Management contains a range of sub-categories, many of which are among the most complex and challenging indirect services to manage, with vendors constantly taking advantage of these complexities to grow margins after deals get signed. To make matters worse, the convenience-based solutions designed to help customers better manage these services—like IFMs—are usually “cost-plus” models where the incentives are not aligned with the customer’s bottom line. As a result, vendor margin-grabbing strategies are allowed to fly through the system unchallenged.
Within Security & Guard Services, a huge range of tactics related to labor billing drives spend up in ways that don’t necessarily jump off the invoice as non-compliance. Wage rate increases are a constant struggle, too, as guard services providers are incentivized to push rates up beyond required levels, giving themselves raises in the process by growing their markup volume.
Within Waste & Recycling Services, the most common savings-eroding supplier practices include unwarranted service increases, warranted service changes with unpermitted price increases, or even recycling contamination being billed rather than addressed and remedied.
In the Pest Control category, you can face margin-grabbing tactics in the form of unnecessary services like out-of-scope treatments, reactive versus proactive management, or fluctuations in the frequency of service.
A pervasive and P&L-damaging practice within the Uniform Rental category is that of new product additions, including “free trials” that end up on invoices, or withheld information on new product-driven variable charges.
Energy & Utilities is simply a vast category with a huge range of local and regional providers, making invoice management alone a massive task. But even beyond bill payment, there’s a web of constantly changing regulations and market volatility, and pressures to achieve sustainability goals while controlling spend.
Click on a service category to learn more
With Fine Tune
Continuous Management Dedicated, vigilant P&L-focused advocacy
When you hire Fine Tune, we take you off the Indirect Expense Roller Coaster.
Without Fine Tune
Perhaps the most important transformation of modern procurement teams is to use deeper insights and cutting-edge tools to better identify opportunities for process improvement and cost savings. That said, finding cost savings includes the task of managing complex and indirect services — a challenge that trickles over to category managers and eventually finance.
When it comes to managing complex indirect services, a good contract often still winds up yielding a bad deal. As indirect suppliers have realized how lean their customers are, they have devised myriad buttons they can push and levers they can pull to extract profit — and erode procurements’ efforts — after contracts get signed.
Procurement in 2024 is simply unequipped to engage in this constant, daily joust with these vendors over the bottom line. Take this sampling of unique factors and nuances that regularly occur within indirect services categories and damage procurements’ efforts1:
Technology Industry-specific software, eMOAT℠
Expertise World-class industry insiders
Continuous Management Dedicated, vigilant P&L-focused advocacy