FLADCO News

Spend Culture

Posted by Mark Mackson on Feb 16, 2017 10:38:27 AM

What do a $436 hammer, a $7,662 coffeemaker, a $640 toilet seat and a $659 ashtray have in common?

These items were part of an extensive list of overpriced purchases by the                       Department of Defense in 1985 that became a sensationalized scandal during President Ronald Reagan’s term.

Unfortunately, that happened over 30 years ago and, yet today, there continues to be many experiences of this uncontrolled spending.

In the auto industry, the “Great Recession” forced unconventional deep spending cuts that helped many dealers survive.

However, I question whether we have maintained the same attention to spending habits as the industry did which helped achieve record profits in the years that followed the Great Recession. 

The hammer, coffeemaker, toilet seat and the ashtray in 1985 revealed to us that patterns of overspending exist in all industry and are generally found in the company’s indirect spend; or in other words, the expenditure on goods that do not add value to the business bottom line.

These expenditures tend to fly below the radar of most companies even though they account for the large amount of dealership purchases.

The truth is, the fault lies not in uncontrolled spending—but lies in the failure to recognize that companies do not have a process to take control of their spending.  The process is not the same as laying off employees or unsustainable attempts at penny pinching.  The process is merely what spend culture is:  it is process driven, proactive and continuous.

 

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Topics: Purchasing


Mark Mackson


Mark is the Founder and CEO of Fladco.
He has over 30 years of Financial and
Group Purchasing experience.

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