For business owners who look to benchmark progress with indirect spend allocation, checking in on these factors can provide insight into how they manage indirect spend. More importantly, measuring indirect spend over time cites areas for improvement, and with improvement comes a higher budget for initiatives that will push a company forward, such as research and development.
Ranking Top Companies by Indirect Spend Management
Companies that manage indirect spend successfully deserve recognition for finding an effective balance of direct and indirect expenditures. These companies should act as a guide for newer, or financially mismanaged, businesses that can benefit from an example of appropriate spend allocation.
Additionally, mirroring effective models of indirect procurement can quickly take hold across similar businesses within their respective industries, providing growth and sustainability for many companies, employers and workers.
Therefore, we compiled a list of 10 companies that have a strong track record of allocating indirect spending appropriately and effectively.
We chose the 10 leading companies below based on factors including innovation and financial distribution, growth as a result of indirect spend savings and overall profits after expenses.
1. Delta Airlines
Delta Airlines established its Atlanta-based headquarters in 1929. Since its inception, Delta has grown into one of the world’s largest airlines, carrying more than 160 million passengers to their destination every year.
Delta deserves a spot on our list for using technology and data analysis to leverage discounts. At one time, Delta hubs acted as individual business units, and each unit within the company held the responsibility to maintain, and purchase, services and supplies. This practice led to inconsistencies, in addition to rising indirect spend-related costs, across multiple hubs within Delta.
Eventually, Delta used a software package to reveal financial issues across the business, and with this information, the company consolidates resources and spending to maximize profit. The improvement to indirect spend included savings of millions, with a savings of $11 million on hotel rooms in one three-month period alone.
Delta took indirect spend management one step further, and made the decision to become their own suppliers by purchasing a refinery. Costs for a refinery had proved to be Delta’s largest expense, and by moving that in-house, they improved profits for the company significantly.
As a leading manufacturer of motorcycles, Harley-Davidson owns factories across the United States and markets its products worldwide. Establishing a strong global presence certainly has additional logistical, and manufacturing, considerations that can quickly drive up a company’s indirect spend.
Newer fans of the iconic brand may not know Harley-Davidson suffered a significant financial crisis in 2009. Following this crisis, Harley-Davidson implemented fundamental changes to its approach to managing indirect spending costs. One of these changes involved outsourcing all indirect purchases to only three suppliers: a move that saved Harley-Davidson $4 million in the first year of its implementation.
3. Cadence Design Systems
Cadence Design Systems, a multinational electronic design automation and software and engineering services company, opened its doors in 1988. Based in San Jose, Calif., this Fortune 900 company owns sales offices, research facilities and design centers throughout the world.
Cadence gained quite a reputation when it made the choice to use advanced technology in an effort to improve indirect procurement. Cadence invested in technology that provided thorough insights on where to find savings opportunities, particularly when it came to vendor relationships. After rebuilding and reorganizing its approach to indirect procurement, Cadence Design Systems reported $6 million in savings.