All companies, regardless of their size, require inputs and services to operate. These needs can be of diverse nature. From acquiring raw materials, packaging or simple office supplies. Purchasing (or sourcing) departments are usually in charge of procuring these requirements.

But what happens when a company does not have an efficient purchasing management? That's when problems and dark purchasing arise. These are also called "dark purchasing" and involve money leakage. Without the right tools applied in purchasing management, companies can lose valuable resources. These can be tangible resources such as monetary resources. Or they can be intangible, such as time and savings opportunities not detected in a timely manner.

In the 1980s, the "Kraljic matrix" was first formulated by Peter Kraljic in the Harvard Business Review. More than forty years later, it is still just as relevant. This theory points out that there are four types of products or services that a company may require through its purchasing department: leveraged, strategic, routine and critical.

For inputs and services in the "strategic" and "critical" categories, it makes sense to work with a few well-established suppliers with low turnover. But if we are talking about "leveraged" and "routine" products, e-procurement tools such as wherEX can generate significant benefits for companies. Here we are talking about commodities such as raw materials or non-critical products such as cleaning materials.


Prevent losses in purchasing management

In the "leveraged" and "routine" products is the so-called indirect expense (which represents about 30% of the total expense in purchasing management) and which disappears with spontaneous or sporadic purchases because they are not usually planned in advance. It is also common that these indirect expenses are not under the supervision of any specific department since they are generally "small" purchases compared to direct spending. Therefore, it is possible that no one person within the organization knows exactly how much money is being spent on these operations.

In 2020, the National Economic Prosecutor's Office (Chile) revealed in its "Market Study on Public Procurement" that there are losses in public spending of around 10% in supplies and services for the State. In addition, a report by the consulting firm Accenture states that a $1 billion dollar company can lose almost $5 million annually due to the lack of control in its industrial purchases and the loss is proportional if we talk about smaller companies. This shows that these irregularities are present in the private sector as well as in the public sector.

With technological tools such as wherEX, it is possible to keep full traceability of procurement and supply management. In this way, technology becomes the best ally to prevent fraud or collusive behaviors that in the long run are highly costly for businesses. In addition, thanks to the Data Analytics module provided by wherEX, companies can make more informed purchasing decisions and even implement procurement strategies such as economies of scalewhere significant savings can be generated.

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