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Straight Talk about Indirect Procurement

May 15, 2012
The finance and purchasing departments need to get on the same page about their indirect procurement.

As the former CFO of such companies as Sprint, Eastman Kodak Co. (IW 500/124) and Unisys Corp. (IW 500/209), as well as vice president of finance of General Electric Co.'s (IW 500/4) plastics division, Robert Brust's management philosophy was to bring procurement into the finance department, at times meeting daily with the purchasing team to go over expenditures line by line. While acknowledging that getting directly involved in indirect (i.e., non-production related) procurement didn't necessarily win him any popularity contests, Brust believes that CFOs need to pay closer attention to this area, particularly since it can represent as much as 20% to 40% of revenue. Reducing the amount spent on MRO (maintenance, repair, operations) activities in particular can lead to significant savings.

Brust

"When trying to help a company in a turnaround, it's imperative to look in every corner, especially the ones that are hiding, often unknowingly, hundreds of millions of dollars in possible savings," Brust observes. "On the other hand, managing indirect procurement is by no means a tool only for struggling companies. I don't know a CFO who isn't tasked with growing the company. And growth takes investment. Healthy companies can tap indirect procurement for a sustainable source of savings to fund R&D, innovation and expansion into new markets."

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