What would the start of a new year be without predictions?
A few of the spend analysts at CCM took out their crystal balls and offer the following insights for 2017 regarding indirect spend. We welcome any feedback or questions you have about them.
Spending uncertainty with new administration
Susan Walker, Director of Procurement Strategy
“Writing in Digital Supply Chain, Dale Benton predicts that uncertainty following the US election may cause companies to look at serious cost reduction strategies in 2017, with the focus on indirect procurement—the goods and services that keep an organization running but are not components of the products or services it provides, like office supplies, background screening, travel and small parcel shipping. In fact, I was happy to see him say that it’s time for indirect procurement to finally get some respect! When there’s risk and uncertainty, indirect spend is an area where businesses can exert some control.”
Insights from indirect spend data
Natalya Berdzeni, Executive Vice President
“Many organizations continue to cut costs rather arbitrarily, which can create new problems or negatively affect operations and productivity. Businesses and law firms with accurate spend management data are the ones who will excel, because they can identify precisely how and where to trim indirect expenses. That includes not only internal spend data, but also external benchmarking data to identify areas that could be improved.”
Controlling spend through collaboration
Robyn Rebollo, Vice President
“I see the need for greater collaboration between procurement and the organization’s lines of business. Of course, procurement serves an important role in monitoring and controlling spend activities, but when they consult regularly with managers and department heads, the entire process becomes friendlier and more productive. In my focus on information services, for example, it’s crucial that we keep the lines of communication open to give them a stake in spend management decisions that ultimately affect them.”
Scrutiny and ongoing management of vendors
Kevin Lee, Vice President
“Managing vendors is an ongoing job, to make sure you get what you pay for and that contract terms and conditions are being met consistently. I see many companies and firms relying too heavily on technology, or the vendors themselves. We do find errors, or rebates and other savings opportunities that aren’t used. I see greater emphasis on categorizing vendors and making sure that key suppliers are managed more carefully and viewed as business partners.”
Indirect spend and other insights for law firms
Patrick Gleason, Vice President Corporate and Legal Consulting
“There are currents that have gained strength in the legal services ocean in 2016, but with the uncertainties of how the unexpected new political current will run, it’s best to be cautiously optimistic when forecasting the 2017 flow.
The $437 billion legal services market in the United States will continue to grow, but the increase in demand will not be a boon for law firms. Instead, it will be filled by proportional growth in alternative legal service providers as well as increased in-house solutions. Law firms will have to continue to manage spend more as detailed-focused businesses than as handshake partnerships, rising above the fray of price haggling and engaging procurement experts as needed to keep expenses lean. Office supplies; leasing; multi-functional device programs; legal research; mail – all spend categories will be more closely benchmarked by usage and pricing than in the past as competition increases the need for sophisticated spend management.
Based on candidate Trump’s anti-outsourcing stance, one might think that the foreign-based outsourcing of legal work would be threatened, but the President-elect’s embrace of the pro-business, pro-outsourcing US Chamber of Commerce means legal outsourcing will continue to grow. The trend will continue for near-sourcing and increased, higher level process outsourcing where skilled legal specialists will work, often embedded, for the client. Greater need for keeping on top of competitive, compliance, and business intelligence information will require more strategic deployment of resources by both law firms and clients.
The new Administration’s embrace of the US Chamber of Commerce would also seem to threaten the growth of 2016’s high profile (via the sordid Hulkster v. Gawker trial) legal celebrity issue: litigation finance. The Chamber’s powerful lobbying for tort reform, compulsory arbitration, and restrictions on third party financing to reduce defense litigation expenses and plaintiff’s awards would all also reduce lawyer revenue. However, keeping in mind the incredibly litigious President-elect (3,500 legal actions taken by and against Trump and his companies, according to USA Today), as well as the embrace of third party litigation financing by savvy corporate counsel, litigation finance will likely continue to grow even if tort reform and compulsory arbitration succeeds in a Republican Congress. In fact, more corporate officers and general counsel will seek the monetization of corporate rights and embrace financing (and their inner Trump) for an initial overall increase in litigation.
With the growth of legal analytics and increased sophistication of the inhouse team as well as the advisement of impartial third party finance entities, law firms will be continuing to be competing more than ever to win clients, as strategic legal decision-making will no longer rest with specific outside counsel. The increased importance of Corporate Legal Operation will continue as success in process improvement will carry over into law firm services.”
Indirect spend—The next big thing in savings?
We leave you with one last prediction for 2017, which is that the next frontier for supply chain cost savings will be indirect procurement.
Supply Chain Dive, which normally focuses on direct spend topics in the manufacturing supply chain, suggests that indirect spend, long considered a necessary part of doing business and not an area of focus, is ripe for savings potential.
On that note, we not only wish your business or law firm a prosperous 2017, we’re available to help make it happen.
Contact us with any questions or comments you have regarding your indirect spend for the coming year.