Archive | Upgrade to Premium | Sponsor

{{FIRST_NAME|Readers}},

Last week, I watched a Chief Procurement Office present an update to the executive committee… Impressive slides. Slick graphics. One huge problem…

Their “spend funnel” made no sense.

They bragged about having 80% of the company spend “under management” but couldn't prove a single dollar of realized value when the CFO started prodding...

That’s the most important part!

The CFO's eyes glazed over. The CEO started checking his phone.

I've seen this movie before. You probably have too.

Why bother communicating a spend funnel if it’s not tied to business outcomes?

Lots of procurement teams are tracking vanity metrics that sound good but fall apart under executive scrutiny.

Who cares about Spend Under Management if it doesn’t lead to realized savings?

Today, I want to show you how to build a “spend funnel” that helps communicate what’s most important:

How your procurement strategy is connected to P&L impact.

And you know what… I think this approach will change how you think about procurement’s influence forever.

Here's what we're covering:

Whether you're trying to prove procurement's worth, expand your organizational influence, sell a transformation initiative or just tired of being seen as a cost center, if you don't nail your spend funnel story, you’ve lost before you’ve even begun...

Onwards!

📰 In this week’s edition:

Note: Some of the content listed above is only available in the email version of this newsletter. Don’t miss out! Sign up for free to get the next edition.

👀 In Case You Missed It…
My Best Linkedin post this week:

Every procurement professional faces the same hard choice, over and over again...

Let's clean house. Traditional procurement thinking goes like this:

"We manage X% of addressable spend, therefore we're successful."

Wrong. And here's why that logic is backwards:

🔴 It doesn't connect to business impact. You can negotiate amazing contracts all day long, but if those savings never hit the P&L, what's the point?

🔴 It doesn't prove procurement's value. Without linking strategy to realized savings, you're just another overhead function.

Essentially, the sentence translates to:

“We worked hard on X% of the company’s spend, therefore we’re successful…”

Do you see the issue?

It doesn’t matter how hard you work. Impact is the only thing that matters.

Most teams measure success on "spend under management" but can't prove value creation. That's not impactful procurement… That's procurement theater.

I approach the procurement spend funnel a bit differently than others. My framework has three core objectives:

You need crystal-clear visibility into procurement's current footprint across:

This isn't just about coverage percentages. It's about knowing exactly where your influence starts and stops.

Executives need to understand the scope of your influence before they can help you grow it…

Here's where most teams fail: they assume procurement is responsible for "negotiated savings" instead of "realized value" because most “strategic procurement” functions are not responsible for executing purchasing activities day-to-day (“P2P”).

This is a mistake.

Procurement should always be looking at “end-to-end” spend, even if not formally responsible for the underlying business processes. This is the only way you can prove that your category strategies connect to P&L impact… Strategies need to be linked to clear, data-producing purchasing channels.

Otherwise, procurement negotiates great deals that never materialize into business results. Signed contracts sit in contract management systems or shared drives, never to be seen again… Good luck explaining that to the board.

Without compelling stories, you're dead in the water.

Executives don't care about your 7-step procurement process. They care about business outcomes… They only hear the conclusion of your sentence…

Your spend funnel needs to tell the story of how your specific procurement function is moving from tactical purchasing to strategic value creation.

Make the journey impossible to ignore using this model.

A spend funnel is an analogy for procurement. It demonstrates that dollars that are “funneled” through procurement generate more value than if they didn’t (i.e. where you’re involved in spending the dollars).

Here's my funnel structure:

1/ Total Company Spend
→ Everything your company spends money on. Salaries, rent, software, materials, all of it.

2/ Addressable Spend
→ All spend where procurement CAN have influence. Non-addressable = spend where procurement involvement is useless.

3/ Spend Under Management
→ How much addressable spend is formally under procurement's governance via policy and process. This doesn’t mean it’s been “addressed” (e.g. procurement has developed and deployed a category strategy).

4/ Spend Under Contract/Strategy
→ Spend actively managed from a strategic standpoint. You’ve analyzed the category, developed a strategy to maximize value and executed on it.

5/ Fully Governed Spend
→ Procurement strategy is linked to realized savings through a clear, optimized purchasing channel for repeat purchasing (when applicable).

This last step is where the magic happens…

If you re-read the above, you’ll realize that procurement *doesn’t* produce any value until the last 2 steps… That’s right…

As procurement, I don’t produce any value until I execute on a strategic procurement strategy (negotiated savings) and/or I ensure that strategy has materialized via the purchasing channel if purchasing (or value realization) actually happens after the contract is signed (realized savings)…

So it’s very important that you be able to calculate and tally these two types of savings systematically (as you define them in your business).

You cannot build my funnel without a proper spend cube. Period.

I don't care how mature your procurement function thinks it is… If you don't have spend visibility, you're flying blind.

Even with a spend cube, you'll probably need to work with ranges (X to Y% of spend) because data quality is usually terrible to begin with (e.g. you only have invoice data and/or your systems don't talk to each other making hard to follow the end-to-end spend lifecycle).

Here's the beautiful part: When executives ask why you're using ranges, that's your opening to discuss better processes, systems and data capture.

Suddenly, you're not just talking about procurement… You're talking about organizational capability and competitive advantage.

Stop asking: "How much spend does procurement touch (or get in the way of…)?"

Start asking: "How much spend can we prove we're optimizing, end-to-end

(Again… This is regardless of whether or not you’re responsible for the end-to-end process… Don’t just let AP flounder with the invoices…😅)

This shift changes everything. It forces you to focus on:

→ Addressable spend comes BEFORE your “spend under management” scope. Just because spend is "addressable", it doesn't mean you have jurisdiction/influence over it. And you need a tool to communicate this… Hence the funnel.

→ Procurement's job is moving spend down the funnel systematically until full, end-to-end governance is in place. Your category strategies need to be linked to realized savings in P2P processes or you’re not done.

The biggest gap? Most procurement teams measure success on "spend under management" but can't prove value creation.

If your spend funnel doesn't exactly like mine, that’s fine… Ultimately, what matters is having clear, coherent definitions that connect procurement activity to business results.

Your spend funnel must help you quickly answer the following questions or it's time to rebuild:

Get this right, and everything else becomes possible.

Miss this, and you'll constantly keep fighting for credibility.

What do you think? Is your spend funnel radically different than mine?

Reply and let me know. I read every response.