Consolidating purchases across the organization and minimizing the number of suppliers you work with comes with a plethora of benefits.

Among other things, it reduces wasteful spending, helps build strong supplier relationships, and makes it easier to spot opportunities to save your organization money.

But of course, reaping these benefits is often easier said than done.

Why?

Because spend aggregation comes with its own set of challenges.

In this article, we’re going to dive into the specifics of these challenges, explaining why they are prevalent and how you can overcome them.

Let’s get into it.

Data Fragmentation

The first challenge that can significantly hinder the success of your spend aggregation efforts is data fragmentation.

This happens when your organization’s data is scattered across and stored in multiple different systems and formats, resulting in data silos.

Think of it as a jigsaw puzzle.

Each department and location has a few pieces of the puzzle that they base their purchasing decisions on, but they have no idea which pieces the others have.

They’re doing the best they can with the information they have, but they’re unable to do what’s best for the bigger picture—the organization as a whole.

This fragmentation makes it impossible to aggregate spend and make decisions based on complete data, experts agree.

Bruno Van Cauwenbergh, a procurement professional with over 25 years of experience is one of them. Here’s what he has to say on this topic.

“Without a centralized system to track procurement activities, organizations struggle to gather accurate and comprehensive data on their spending patterns. This makes it difficult to identify cost-saving opportunities, track supplier performance, and make informed decisions. With a lack of data-driven insights, organizations are essentially operating in the dark, making procurement a hit-or-miss game.”

So, what can you do to get a unified view of all the spend data and successfully aggregate it across the organization?

For starters, you need to consolidate all the puzzle pieces with the help of a single source of truth: a centralized data management system.

Bringing all of your data under one roof can result in significant time and cost savings.

This was certainly the case for Karnataka Engineering Enterprises, a company manufacturing and supplying heat exchangers and blowers for the electrical manufacturing industry.

Source: Siemens

With 4 manufacturing units spread across the city of Bangalore, India, and data being stored in an unstructured way on external hard drives and different computers, the company was struggling to see the big picture.

However, once they invested in a solution that helped them consolidate all the dispersed data, they reaped significant benefits.

Illustration: Veridion / Data: Siemens

This goes to show that, although it may seem daunting, making the effort to centralize your spend data is worth it.

In fact, having a single source of truth should be the standard, according to procurement experts.  

Kelly Barner, Co-founder and Head of Content and Operations for Art of Procurement certainly believes so.

Illustration: Veridion / Quote: LinkedIn

Putting a stop to fragmented data is a win for everyone.

For employees across the organization, it means that they can confidently follow the established procurement workflows, knowing that they have access to all the information.

For you, it’s the ability to recognize opportunities for spend aggregation and contributing to the company’s financial success.

Poor Data Quality

Unfortunately, fragmented data isn’t the only issue.

Oftentimes, on top of being scattered across different systems, data is inconsistent, inaccurate, and incomplete.

This happens when there is no single agreed-upon workflow for entering data, so different units and even individual employees do it however they think is best.

Such data complicates spend data analysis and leads to difficulties with spend aggregation.

But there is also a hefty price tag attached to bad data.

Illustration: Veridion / Data: Rosslyn

And it makes sense, really.

Even if you manage to consolidate all of the data necessary for spend aggregation, you’ll likely encounter issues such as:

• duplicate records,
• incorrectly categorized expenses,
• missing data,
• outdated supplier information, and
• incorrect pricing information.

Naturally, correcting all of that can take a lot of resources.

And yes, preventing bad data from entering your organization’s systems in the first place is the obvious best practice.

But in reality, you’re likely already struggling with the issue of less-than-stellar data to some degree.

And it’s not like you can just get rid of it all and pretend like it never existed.

So what is the best course of action, then?

Well, the best thing you can do is cleanse your data and establish new workflows and processes to ensure that going forward, all the data in your systems is correct and standardized from the get-go.

Michael Ashmore, VP of Product Management at Precisely, a software company specializing in data integrity tools, explains why taking the time to cleanse your data is so crucial.

Illustration: Veridion / Quote: Rosslyn

And while it sounds pretty straightforward in theory, in reality, this important task can be quite time-consuming and riddled with human error.

Luckily, there are data cleansing tools out there that can automate this task and ensure the completeness, consistency, and accuracy of your data.

You can see an example of such a solution below.

Source: McKinsey

The bottom line is that clean and consolidated data will provide you with the foundation for making correct, data-driven decisions when it comes to managing and aggregating company spend.

If you’re struggling with large volumes of poor data and feel like that goal is unachievable, we’re here to tell you not to worry.

As you can see, there are solutions out there that can help you get back on the right path and reap all the benefits.

Check our other article How to Improve Your Procurement Data to learn more about this topic.

Resistance to Change

Now that we’ve tackled the data-related issues that can make spend aggregation difficult, let’s talk about another important factor—the human one.

You can introduce all these new tools and processes that are meant to aggregate spend, but they alone won’t bring you the desired results.

For them to actually work in your favor, you need people to use them.

However, the adoption of new tools and processes is a bigger challenge than you might think, and we have studies to prove it.

Gartner did some research on resistance to change in procurement and these are the findings: 71% of procurement leaders listed resistance to change as a core challenge.

Illustration: Veridion / Data: Gartner 

Such a high level of resistance to change naturally begs the question, “Why?”

Why don’t people like improvements?

As it turns out, the reasons can be divided into two categories: psychological and organizational.

Psychological Reasons for Resistance to Change	Organizational Reasons for Resistance to Change
Ambiguity about the need for change	A company’s history of dissatisfactory change implementations
Exclusion from change-design discussions	Organizational culture and mindset
Change in routines	Lack of communication between leaders and employees
Lack of visibility into the benefits of change	Too short of a change timeline
Concerns with competence	Lack of support before, during, and after change in previous change implementations
Increased workload

Whether they’re resisting the new spend aggregation processes because they prefer to stick with familiar methods, or because they feel like the change came on too suddenly, one thing is for sure:

Simply telling your employees that huge changes are coming isn’t enough.

Why?

Because, as explained by the author and expert in change management and organizational development, Rick Maurer, resistance itself isn’t the main reason why change implementation fails.

Illustration: Veridion / Quote: Rick Maurer

It’s the way in which you introduce changes that makes all the difference.

So, how do you do it the right way?

Well, instead of just announcing that you’ll be using new tools and workflows to aggregate spend, initiate a dedicated change management program.

Put yourself in the shoes of the employees and really try to understand how the change is going to affect them and why they might not be happy with it.

Understanding why they might resist the new procedures will help you figure out how you can best support them during the transitional period.

Speaking of “why,” don’t forget to explain the reason why you’re introducing all these new tools and processes.

When you openly communicate the benefits of making a change, adopting it becomes easier.

Aside from that, make sure not to introduce changes too abruptly.

Instead, give the employees time to adapt and make it clear that help and training are available every step of the way.

And remember: accepting change isn’t always easy, but if you’re mindful of the way you introduce it, it becomes significantly less challenging.

Use of Outdated Technologies

Spend aggregation can also be hindered by technological limitations.

You might be ready to start using that new data cleansing tool and figure out which suppliers you can let go of to consolidate your spend.

But can the legacy systems your organization uses support you in that endeavor?

Likely not.

And, according to The Hackett Group, you’re not alone.

Their 2023 report revealed that over 40% of enterprises were using legacy systems for procurement that needed replacing.

Illustration: Veridion / Data: The Hackett Group

The truth is, if your company has been using the same old systems for ages, they might not be compatible with your current needs.

Because of that, trying to integrate old and new systems could be next to impossible and result in a huge waste of time and resources.

So, the solution is clear: wave goodbye to outdated systems that don’t support you and invest in more modern solutions that will actually make spend aggregation easier.

For instance, think about the way you evaluate your suppliers in order to identify the top-performing ones.

Do you spend hours digging through different systems for purchase orders and delivery records, trying to determine where you’re getting the best value for money?

If yes, it is time to replace your outdated manual methods with a more effective approach.

Take our platform, Veridion, for example.

Veridion is an AI-powered data service designed to provide you with quick and easy access to fresh data about millions of suppliers around the globe.

But apart from facilitating the discovery of new suppliers, you can also explore your existing supplier database.

Source: Veridion

Let’s say you want to deduplicate and consolidate your Supplier Master Records (SMR) to get a clear, unified view of who your suppliers actually are and whether they meet your criteria.

All you have to do is enter the company name and address, and our Data Enrichment Service powered by advanced algorithms will fill in the gaps, allowing you to identify the top performers.

Source: Veridion

With this information at your fingertips, you can start developing your spend aggregation strategy.

And the best part is, this is just one example of how upgrading the technologies you’re using can help you aggregate spending more efficiently—the possibilities are endless.

Yes, getting new procurement tools will require a financial investment and some getting used to it.

But think about how much time and money you’ll save once they start helping you consolidate your purchases and realize better pricing and terms!

Management of a Large Supplier Base

The last challenge on our list today can be so daunting that it might talk you out of trying to aggregate spend at all.

Of course, we’re talking about managing a large supplier base.

Since one of the goals of spend aggregation is to reduce the number of suppliers you’re working with, it’s only natural that having a large and diverse supplier base is a difficult starting point.

You can see some common challenges that come with managing a large supplier base illustrated below.

Source: Veridion 

As an example, let’s talk about supplier performance monitoring at a company that doesn’t aggregate their spend and works with lots of suppliers.

If there’s no centralized oversight, every location the organization operates in might procure the same items from its preferred supplier and have dozens of suppliers—if not more—for the same thing.

Now, add the fact that the data about how each location spends money on these supplies is siloed.

It quickly becomes clear that consistently evaluating all of these suppliers is pretty much impossible.

Coming to terms with the fact that you actually have no idea how many suppliers you have or what each one of them does for you can discourage you from trying to aggregate spend at all.

However, once you take the leap and consolidate your suppliers, you can expect to reap the benefits such as better pricing and stronger supplier relationships.

This was precisely the expectation of Medtronic when they decided to reduce the number of suppliers and manufacturers they were working with.

This global leader in medical technology and services used to have 9 different supply chain groups and 4 manufacturing groups.

Now, they have one of each.

Their former CFO, Karen Parkhill, elaborated on the thought process behind the decision.

Illustration: Veridion / Quote: MDDI

While it’s not a simple feat, doing what Medtronic did is ultimately easier than managing thousands of suppliers you actually have no use for.

So turn to your tools for supplier management, assess the performance of your current suppliers, and use this knowledge to continue building relationships with only the best ones.

After that, managing your spend will become a breeze.

Conclusion

As you can see, the process of spend aggregation isn’t always an easy task.

If you’re struggling with any of these challenges, there are two things you need to know:

You are not alone, and there is a solution to each of these struggles.

We hope that the insights and tips we shared throughout this article will help you take the plunge and tackle these challenges head-on.

Once you do, you’re bound to optimize the way your organization spends money, and realize it was worth the effort.