Purchasing Governance is fast gaining importance as the management tool to not only execute on Corporate Responsibility initiatives, but also to effectively execute on cost savings and cost avoidance opportunities beyond the low hanging fruits of sourcing or contract negotiation.   Purchasing Governance helps decentralize execution while maintaining control centrally.

For example, companies may require environmentally friendly products for use by janitorial suppliers, or require local/minority-owned suppliers for certain categories.  Companies may apply maximum spend limits on certain areas such as travel.    Certain governments ban contracts with suppliers from certain countries.  Other public sector/government agencies may require detailed specification level disclosure of items purchased within say hazardous categories.

In this context, Purchasing Governance would mean:

a. Collaboratively planning, establishing and communicating global policy guidelines, minimum performance expectations, risk assessment and mitigation plans and compliance metrics

b. Visibility to actual spend and compliance patterns

c. Planning and Executing key initiatives incorporating purchasing governance factors

d. Tracking and reporting on status of initiatives and key measures of purchasing governance across internal departments, external suppliers and key stakeholders

e. Monitoring and Control – establishing continuous process improvements based on closed-loop monitoring of spend and compliance patterns