In today's inflationary world and fragmented supply chains, organizations cannot afford to fly blind when it comes to procurement spending. Increased transparency of the entire Source-to-Pay (S2P) process is essential for successful procurement operations. But spend visibility isn't only tracking costs — it's about empowering leaders to drive efficiency, mitigate risk, and capture value beyond savings.
Direct spends represent an average of 60–70% of all the procurement costs while the remaining are indirect spends. Companies with better spend visibility capture up to 15% higher savings. Despite the benefits, nearly 60% of companies have little or no visibility – especially in indirect spend where optimization opportunities are often overlooked. Better visibility into indirect spend alone can yield up to 30% in savings. Furthermore, ~75% of procurement savings are driven by strategic sourcing, enabled by improved spend data access. It's a missed but fixable opportunity.
Spend Visibility in Direct Procurement: Driving Cost, Continuity, and Compliance
Direct procurement involves sourcing raw materials, components, and parts critical to production and delivery. Any lapse here could result in disruptions such as stockouts, production downtime, unplanned shipments, or inflated price, ultimately impacting profitability, revenue, and reputation. Real-time visibility of direct spend is crucial to ensure proactive data-driven decisions for:
- Optimizing Supplier Portfolios
Industries like FMCG and healthcare have complex supply chains, where supplier bases are fragmented, buying power is diluted, and resources are stretched. But consolidation isn't just about shrinking the supplier base—it's about aligning with the right partners. One global Consumer Health company streamlined and consolidated its fragmented tail supplier base by leveraging e-sourcing tools and weighted RFx evaluations. The result: more than 40% reduction in supplier count, $7.3M in savings, and deeper partnerships with core suppliers who met quality and service standards.
- Unlocking Cost Savings
Procurement complexity often hides in plain sight, especially when identical specifications are sourced at varying prices across regions. Without analysis of standards, the identification of price variances can be slow and inconsistent. To tackle this, a global organization in partnership built an automated spend analytics tool. It pinpointed cost drivers, variances and assessed potential savings. This enabled category managers identify inefficiencies and uncover $28M in potential savings thereby improving sourcing precision and agility.
- Driving Supply Chain Resilience
The pandemic exposed vulnerabilities within globally concentrated supply chains, making resilience a strategic priority. With the right technology, companies can assess not just what they buy, but from where it is sourced, and how hidden costs can impact the bottom line. A transnational company experienced rising costs and delays due to significant dependency on international suppliers. A Total Cost of Ownership (TCO) analysis revealed hidden costs, including emergency freight and procurement inefficiencies, which once rectified, resulted in over $500K in savings on freight and safeguarding $190M in Net Trade Sales from potential disruptions arising out of geopolitical situations such as recent Israel-Iran war, Ukraine-Russia unrest, etc.
- Ensuring Compliance and Quality
In the current landscape driven by ESG considerations, companies must align their procurement function with environmental and compliance standards. Visibility of supplier data linked with sustainability metrics is critical. A global organization, focused on palm oil sustainability, analyzed over 5,000 raw materials to determine volumes, palm oil content, and certification status. By integrating sustainability criteria, the company eliminated non-compliant suppliers and ensured adherence to regulations, thereby laying the foundation for more sustainable procurement practices.
Indirect Procurement: The Hidden Goldmine
Indirect procurement, encompassing areas such as IT, professional services, facilities, and marketing, is often decentralized, inadequately managed, and plagued by maverick spend. Yet, this is where many CFOs are now looking for savings, especially as budgets tighten. Enhanced spend visibility is often the first step towards gaining control over this cost center.
- Category Spend Optimization
Decentralized purchasing can lead to redundancy, fragmented supplier relationships, and missed savings opportunities, particularly within indirect spend categories. A global company addressed this by consolidating its facilities management contracts, including janitorial, HVAC, and security services, under a unified global framework. The company leveraged volume across regions, resulting in a 22% cost reduction, standardized service agreements and introduced performance KPIs, enhancing operational efficiency and enabling sustainability monitoring across regions.
- Supplier Rationalization
A large supplier base can often lead to inefficiencies and weaken negotiating power. A multinational company sourcing IT peripherals and office supplies from over 120 predominantly local vendors discovered that many purchases were fragmented and adhoc. By analyzing historical spend data, the procurement team identified top-performing suppliers and reduced the supplier base by 65%. This rationalization secured bundled discounts, improved service consistency, and generated an additional 8% savings through negotiated rebates.
- Controlling Maverick Spend
Maverick spending, which occurs in departments procuring goods or services outside established processes, can significantly inflate indirect costs. One organization tackled this issue by implementing a centralized vendor management system featuring a vetted supplier pool, transparent pricing, and a stringent purchase approval process supported by comprehensive policy training. Within six months, unplanned spending decreased by more than 30%, resulting in improved cost control, enhanced operational efficiency, and clearer evaluation of procurement outcomes.
Bringing It All Together: Making Visibility Actionable
Implementing visibility is not a plug-and-play exercise. Procurement teams must invest in:
- Clean and categorized spend data – taxonomy, supplier hierarchy, material grouping
- Integration of systems like ERP, e-sourcing, contract lifecycle, and supplier performance
- User-friendly analytics tools that enable storytelling with data
- Stakeholder buy-in from finance, business units, and IT for lasting success
When executed right, visibility enables procurement shift from reactive firefighting to proactive management—balancing cost, risk, and performance. It empowers teams to challenge the status quo and elevate procurement into a strategic business partner.
Conclusion
Spend visibility is not just a metric—it is a mindset. As procurement leaders, we must champion the shift from data hoarding to data-driven decision-making. The companies that lead in this space are not necessarily the biggest—they're the ones that act fastest on the insights they uncover.
If you want procurement to influence revenue, risk, and resilience, not just savings, start with visibility. Because you can't fix what you can't see.
Originally published by CXO Today.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
