Total Spend Under Management

Related KPIs

Total Spend Under Management Interpretation

High TSUM values indicate effective management of expenditures, reflecting strategic alignment with business objectives. Conversely, low values may suggest missed opportunities for savings or inefficient procurement practices. Ideal targets typically align with industry benchmarks and organizational goals.

• Above 80% – Strong management; potential for additional savings
• 60%–80% – Adequate; review procurement processes for improvements
• Below 60% – Weak management; immediate action required to enhance control

Total Spend Under Management Benchmarks

• Global average TSUM: 70% of total spend (Gartner)
• Top quartile companies: 85% of total spend (McKinsey)

Common Pitfalls

Many organizations underestimate the importance of tracking Total Spend Under Management, leading to missed savings opportunities and inefficient resource allocation.

• Failing to categorize spending accurately can obscure insights. Without clear classifications, organizations may struggle to identify areas for cost reduction or strategic sourcing.
• Neglecting to engage stakeholders in the procurement process often results in resistance to compliance. When departments feel excluded, they may bypass established guidelines, undermining overall spend management.
• Overlooking the importance of data quality can lead to misguided decisions. Inaccurate or incomplete data hampers the ability to perform effective variance analysis and benchmarking.
• Relying solely on historical data without considering market trends can skew forecasts. Organizations must adapt to changing conditions to maintain effective spend management.

Improvement Levers

Enhancing Total Spend Under Management requires a proactive approach to procurement and stakeholder engagement.

• Implement a centralized procurement system to streamline processes and improve visibility. This allows for better tracking of expenditures and fosters compliance across departments.
• Regularly train staff on procurement best practices to ensure alignment with organizational goals. Empowering employees with knowledge enhances their commitment to managing spend effectively.
• Utilize advanced analytics to identify spending patterns and uncover savings opportunities. Data-driven insights can inform strategic sourcing decisions and improve overall operational efficiency.
• Foster collaboration between finance and procurement teams to align objectives. Joint efforts can lead to more effective budget management and improved forecasting accuracy.

Total Spend Under Management Case Study Example

A leading technology firm, Tech Innovations, faced challenges in managing its Total Spend Under Management, which hovered around 65%. This inefficiency tied up significant resources and limited their ability to invest in R&D. To address this, the CFO initiated a comprehensive spend analysis project, engaging cross-functional teams to identify key areas for improvement.

The project revealed that a substantial portion of their spend was not being tracked effectively, particularly in indirect categories. By implementing a new procurement platform, Tech Innovations enhanced visibility into spending patterns and established clear guidelines for supplier engagement. This shift not only improved compliance but also fostered better relationships with key vendors.

Within a year, the company increased its TSUM to 80%, unlocking an additional $15MM in savings. These funds were redirected into innovative projects, allowing Tech Innovations to accelerate product development timelines and enhance their market position. The success of this initiative demonstrated the value of a robust KPI framework in driving strategic alignment and operational efficiency.