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Dan Hillier | 29 Jun 2021 | 3 min read
Unearthing the Gold in Decentralised Sourcing
While mining companies will spend a great deal of time and effort on procurement for high-cost projects, millions of dollars go out the door every year in poorly-managed decentralised spend.
Low-value and low-priority thinking
Decentralised sourcing refers to the many purchases that are made every day by buyers across your business. By “buyers”, we don’t mean procurement professionals; we mean anyone in the business who is empowered to make a purchase up to a certain spend threshold.
In mining companies, decentralised sourcing often sits with administrative positions such as EAs or secretaries. No one really owns it in its entirety, which reflects the low priority it holds. But this thinking is a mistake.
Some of the challenges created by unmanaged decentralised sourcing include:
- Poor data visibility
- Lack of spend analytics to identify cost saving
- Inefficient sourcing from suppliers by phone and email
- Duplication of spend
- Missed opportunities for supplier consolidation and leverage
- Supply chain and brand risk.
With the help of sourcing software, mining companies can bring their decentralised spend under control and save as much as 9.74% – a saving that far outweighs the cost of a software platform.
Risk and reputation
In a sector where ESG (Environment, Social, and Governance) factors are critical to winning a Licence to Operate, decentralised spend carries a great deal of risk. For example, a buyer may choose to source from an office maintenance provider located several hours away, unaware that they have overlooked a supplier near the mine site in doing so. This not only damages the company’s reputation in the local community, but adds the risk of a lengthy supply chain.
This is why mining companies need to know who they are spending with. They need to know if suppliers are compliant, if they are local, social, Indigenous, and more. Armed with this information, buyers can make better decisions to improve their ESG impact and reduce the risk of brand damage.
The key to visibility and control is having a single source of truth for spending data. This means shifting decentralised transactions away from emails and phone calls, and moving data from siloed spreadsheets into a single system.
Saving time through ease-of-use
Decentralised buyers are time-poor. Procurement is not their main job; rather, it’s something an EA or other admin professional will try to get done as quickly as possible while juggling other tasks.
Procurement policies may well exist to guide buyers’ decision-making, but they are often ignored or bypassed. For example, there may be a policy to source three quotes and choose the best, but a busy EA may simply default to using a supplier they have worked with previously. Similarly, your organisation may aspire to use more Indigenous suppliers, but buyers will typically lack the time to seek out and engage these vendors.
Procurement software should make decentralised sourcing easier and faster than sending an email or making a phone call. With VendorPanel, buyers can search for local suppliers at the touch of a button, generate an RFQ (request for quote) instantly, and lower risk by checking vendor compliance at a glance. Additional value can then be unlocked through the power of spend analytics to unearth the gold that lies hidden in your decentralised spend.
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