You probably haven’t heard of the term. dark purchasingbut here we explain it to you.
One of the problems brought about by the pandemic -and about which little is said- is the weakening of business ethics and transparency. During the height of the health crisis, the EY consultancy made its report on Corporate Integrity in which more than 3,500 employees in 33 countries were interviewed, from management positions to new executives. The shocking thing about the report is that 46% of the executives surveyed admitted that they would sacrifice business integrity in exchange for short-term financial gain, a figure that rises to 51% in the case of senior managers.
According to the same report, 28% of those interviewed said that the interruption in supply chains during the pandemic was one of the greatest risks for ethical business conduct, since the scenario of vulnerability and uncertainty provides incentives for companies to skip the rules. internal regulations and standards of compliance when negotiating with your suppliers.
When it comes to purchasing areas, where large amounts of money are handled, there is a dark area where many goods are purchased outside of standardized processes and cannot be easily traced. This gives rise to unethical practices.
When a purchase or bidding process is carried out so that a company can supply itself with inputs or services, it is generally able to efficiently control the money it invests in its “strategic expenses”, that is, those that are essential for the business. In general, up to 70% of the amount of purchases made by a company fit here, and generally does not exceed 20% of the negotiation processes.
But what happens to the remaining 30%? Here are the “indirect or non-strategic expenses”, where in addition the purchases are often spontaneous or sporadic since they were not previously planned. In these categories, around 80% of purchase orders and services are usually processed.
It also often happens that these expenses are not under the supervision of any specific department since they are generally “small” purchases compared to strategic spending. Therefore, it is possible that no one within the organization knows exactly how much money is going into these types of expenses.
Many companies do not care enough about indirect spending, arguing that it does not generate revenue or is essential for the operational continuity of the business. While that is true, it is also true that indirect spending does deplete resources.
The last thing a company wants is to lose money and have no control mechanism to prevent it. That is exactly what happens with the lack of traceability and transparency in the supply of companies, which is known as “dark purchases” or dark purchasingin English.
We must not lose sight of the fact that companies can lose millions of dollars a year simply due to a lack of visibility and control over these indirect expenses. A report by the consulting firm Accenture maintains that a $1 billion dollar company wastes around $15 million a year due to a lack of control over its purchases. In the case of smaller companies, the loss is proportional.
He dark purchasing It is problematic not only because it lacks ethical elements, but also because it generates large amounts of money leaking from companies and, lacking planning, a lot of time is invested in these operations.
Likewise, it also prevents buyers from using their energy and talent on tasks of greater value to the business, such as carrying out strategic planning for the purchasing department. The search and recruitment of suppliers implies wear and tear for buyers and too much value vanishes in repetitive tasks such as phone calls, mailings and documents.
He dark purchasing It is not something new, it has always existed, many supply managers are familiar with this type of irregularities, since they are recurring. The good news is that digital transformation is proving that, where there may be some human error, technology can offer an efficient and fast solution.
The startup whereEX completely eliminates the risk of dark purchasing, with full traceability and transparency on purchasing management. By centralizing the information in the same portal, simplifying internal audits and through configurable alarms, it is possible to prevent any type of collusive practice between buyers and suppliers.
Technology also makes it possible to strengthen B2B trade under a strict protocol of free competition, something that, until recently, was seen as a distant horizon, in this way the benefits for companies are not only the reduction in their acquisition costs, but also which also ensures that all suppliers can compete on equal terms when negotiating with a company.
By Benjamín García, Founder & Director of Financing whereEX
Wayra Hispam It is the most global, technological and connected Telefónica Movistar open innovation hub. In addition to its operations in Latin America (Mexico, Argentina, Chile, Colombia and Peru), Wayra also operates in Brazil, Germany, Spain and the United Kingdom. More than 500 startups participating in Telefónica’s Open Innovation program are still active, and more than 100 startups are doing business with Grupo Telefónica.