How increasing Spend Under Management can transform procurement outcomes

As organisations aim to optimise costs and strengthen supplier relationships, boosting Spend Under Management emerges as a key strategic lever, driven by technology and best practices to unlock significant savings and mitigate risks.

Spend Under Management (SUM) has emerged as a critical metric for organisations aiming to enhance procurement efficiency, control costs, and fortify supplier relationships. Essentially, SUM represents the portion of a company’s total expe...

nditure that is actively managed through formal procurement processes, approved contracts, and supplier agreements aligned with category management principles. According to multiple industry sources, including a comprehensive guide by Precoro, a higher SUM percentage signals stronger visibility, reduced off-contract spending, and smarter resource utilisation.

Recent benchmarks reveal that many organisations currently manage around 70% of their spend, an improvement over past averages but still short of best-in-class performance where top procurement teams exceed 90% management of spend. Companies with lower SUMs—closer to 60% or less—face elevated risks of unmanaged costs, reduced bargaining power, and data gaps that undermine strategic decision-making.

Calculating SUM involves defining the total addressable spend—excluding non-procurement expenses such as salaries, taxes, and intercompany transfers—and identifying the subset routed through managed contracts and procurement channels. For example, a company with $120 million in total annual spend might classify $60 million as addressable, of which $45 million is managed via contracts, leading to a SUM of 75%. The remaining 25% reflects unmanaged or ‘maverick’ spend, which procurement efforts should target to unlock further savings and mitigate risk.

The distinction between Spend Management and Expense Management underlines the strategic nature of SUM: while expense management focuses on tracking and processing transactions, spend management emphasises proactive control, contract compliance, and supplier relationship optimisation. This holistic approach brings multiple tangible benefits.

First, increasing SUM correlates with significant cost savings through purchase consolidation, volume discounts, and reduced duplicate or off-contract buying. For instance, Delta Airlines achieved $11 million in hotel cost savings within three months by centralising indirect spend and leveraging source-to-pay technologies. Second, a higher SUM fosters stronger, more strategic supplier relationships. Focused spend enables suppliers to anticipate demand volumes, prioritise service levels, and co-develop innovations, as demonstrated by NWLPS’s transition to a Supplier Relationship Management (SRM) framework that deepened collaboration and value creation.

Enhanced risk management is another key advantage. Greater procurement control facilitates better vetting, performance tracking, and audit capabilities, allowing early identification of supply chain vulnerabilities before they escalate into financial or compliance crises. Furthermore, richer spend data supports improved forecasting, strategic sourcing decisions, and alignment with broader organisational goals, as evidenced by tech firm Algorythma’s procurement digitisation, which cut manual errors and sharpened spend visibility.

Despite clear value, many organisations grapple with challenges in expanding SUM. Data fragmentation across disparate systems often hinders comprehensive spend visibility, while resistance to process changes can slow adoption, particularly if controls are perceived as bureaucratic obstacles. Procurement leaders can address these issues by streamlining workflows, deploying e-procurement platforms with embedded approved supplier catalogues, and ensuring user-friendly requisition and approval systems accessible on mobile devices. Collaboration over blame, ongoing stakeholder engagement, and targeted supplier evaluations further support successful SUM enhancement.

Practical steps to raise Spend Under Management include:

1. Classify and communicate unmanaged spend to highlight high-risk categories such as IT subscriptions or travel, thus enabling focused contract consolidation.

2. Simplify contract use and reduce leakage by integrating negotiated supplier catalogues into procurement platforms, making it easier for employees to comply.

3. Accelerate requisition and approval processes to discourage off-contract purchases, with automation reducing cycle times by up to 50%.

4. Foster collaboration to build trust among stakeholders and suppliers, moving from transactional interactions toward strategic partnerships.

Technology plays a pivotal role in enabling these improvements. Tools like Precoro offer centralised spend request systems, enforce procurement policies through configurable workflows, and provide real-time visibility into committed spend and budgets. By preventing unauthorised purchases and ensuring all spending aligns with approved contracts, such systems strengthen governance and forecasting accuracy.

Industry thought leaders emphasise that SUM is not a static figure but evolves with procurement maturity, compliance culture, and technology adoption. Organisations with a SUM above 80% generally demonstrate strong strategic control, whereas values below 60% suggest significant opportunities for improvement.

In conclusion, Spend Under Management serves as a vital barometer of procurement effectiveness, directly impacting cost savings, supplier relationships, risk mitigation, and operational efficiency. Through clear policies, robust technology, and collaborative culture, businesses can substantially increase the proportion of spend under management, unlocking measurable value and building resilient, strategic procurement functions fit for the future.

Source: Noah Wire Services