Insight

Buying Channel Strategy: The secret to ending procurement value leakage

Know your buying channels – how they are defined, prioritized, what they impact and how to make efficient.

Dipan Karumsi

Dipan Karumsi

Principal, Procurement and Business Services, KPMG US

+1 614-249-2384

Len Prokopets

Len Prokopets

Managing Director, Procurement and Business Services, KPMG US

+1 203-233-9077

Corporate Procurement users often time face clunky, unintuitive, and onerous process and systems. A daunting experience makes it less likely for users to comply with the Procurement function’s standard systems and processes and preferred suppliers. The result is leakage of value and lost savings from Procurement’s category management and sourcing activities.

Corporate Procurement can address this gap by redesigning its systems, processes, and capabilities using the lessons of B2C (Business to Consumer) retail. That also means embracing customer centricity where the design reflects the needs and behaviors of the customer. Influencing customers through thoughtful product design can go a long way in improving adoption, increasing spend under compliance and delivering value.

To address this opportunity, organizations need to define a set of processes and tools that will establish buying channels and then direct specific purchases to the right channels that align with the business requirements.

What you buy determines how you should buy it. A Buying channel is the end-to-end series of steps to request, approve, purchase, receive and pay for goods and services. Buying Channels are needed to establish an efficient and effective P2P process. It is important to match individual purchase type to buying channels in order to balance the cost of processing the transaction with control and visibility of the purchase. Suboptimal buying channel design can quickly lead to inefficiencies in processing, lack of control over purchases, ineffective contract compliance, and a less than ideal experience for Procurement users. An organization typically has multiple buying channels, each designed to accommodate a specific set of purchases. 

38% of organizations consider reduction of maverick spending as their number one priority. Well-designed Buying Channels can address the most common breakdown in the P2P process that directly impacts the amount of spend channeled to negotiated contracts. This can reduce maverick spending and offer better tail spend management.