How to Reduce 15–30% of Indirect Spend: Strategies for CFOs in ANZ

April 7, 2025

How to Reduce 15–30% of Indirect Spend: Strategies for CFOs in ANZ

Indirect spend—the costs of goods and services not directly tied to your core mission or product—can quietly siphon off budget in government agencies and commercial organisations. For C-level executives like CFOs in Australia and New Zealand, reducing indirect spend by 15–30% offers a powerful opportunity to redirect funds, enhance efficiency, and strengthen financial health. But it’s not a quick fix—it requires a strategic, multi-pronged approach.

At Trace Consultants, we’ve witnessed how indirect spend can balloon, from unchecked supplier contracts to sprawling project scopes. We’ve also shown it can be reined in. Recently, we partnered with a large multinational client and cut their indirect spend by 17% in just 4 months. In this article, we’ll unpack the strategies that drove that success and outline how ANZ organisations can achieve similar gains. We’ll cover managing scope creep, testing the market, finding alternative suppliers, leveraging National Contracts and scale, benchmarking, supplier performance management, insourcing, and reducing scope—showing how Trace Consultants can help CFOs turn cost control into a competitive edge.

The Hidden Cost of Indirect Spend

Indirect spend includes expenses like IT services, office supplies, travel, professional fees, and facilities management. Unlike direct spend, which drives revenue or core services, indirect costs often escape close scrutiny—yet they can represent 20–40% of total expenditure. In ANZ, where economic pressures demand fiscal discipline, slashing 15–30% from this category can be transformative. Let’s explore how to make it happen.

Managing Scope Creep

Scope creep is a budget’s stealthy saboteur. It occurs when projects or contracts expand beyond their original scope, often unnoticed until costs escalate. In government agencies, a simple training program might grow into an elaborate multi-year initiative. In commercial firms, a logistics contract could swell with unplanned extras.

How to Stop It

  • Lock in Scope: Define clear, measurable deliverables at the outset.
  • Monitor Closely: Review progress against the baseline to catch creep early.
  • Control Changes: Mandate C-level approval for scope expansions, tied to cost-benefit reviews.

Savings Potential

Tight scope management can trim 5–15% from project-related indirect spend by cutting low-value add-ons.

Testing the Market and Finding Alternative Suppliers

Procurement is a goldmine for savings, especially when you test the market and seek alternative suppliers. Sticking with legacy vendors—a common trap in government and commercial settings—can lock in inflated rates or stale terms.

Why Test the Market?

  • Cost Clarity: Market testing reveals if you’re overpaying relative to current pricing.
  • Fresh Options: New suppliers often offer innovative solutions or leaner costs.
  • Bargaining Power: Market insights bolster negotiations with incumbents.

How to Test Effectively

  • Issue RFPs/RFIs: Launch Requests for Proposals (RFPs) or Information (RFIs) in categories like IT, logistics, or consulting to uncover options.
  • Run Pilots: Test new suppliers on a small scale—e.g., one region or department—to evaluate performance without full risk.
  • Target ANZ Suppliers: Prioritise local or regional players for competitive pricing and faster service.

Finding Alternative Suppliers

Alternative suppliers can shake up the status quo. A government agency might swap a global IT provider for an ANZ-based firm with lower overheads. A commercial organisation could replace an expensive logistics vendor with a tech-savvy alternative.

  • Broaden the Net: Explore startups, SMEs, or niche specialists beyond big-name incumbents.
  • Assess Holistically: Weigh price, quality, scalability, and strategic fit.
  • Ease Transitions: Use phased rollouts or dual-supplier setups to minimise disruption.

National Contracts and Leveraging Scale

National Contracts and scale leverage are powerful tools for indirect spend reduction, especially for organisations with multiple sites or large footprints across Australia and New Zealand.

The Power of National Contracts

National Contracts consolidate purchasing under a single agreement, often with one supplier or a select group, to standardise terms and pricing.

  • Consistency: Uniform rates and service levels across regions cut variability costs.
  • Negotiation Strength: A single contract covering all ANZ operations gives you clout to demand discounts.
  • Simplified Management: Fewer contracts mean less admin overhead.

For government agencies, this might mean a National Contract for office supplies across all departments. For commercial firms, it could be a unified facilities management deal spanning multiple locations.

Leveraging Scale

Scale amplifies savings. The larger your spend or geographic reach, the more you can extract from suppliers.

  • Volume Discounts: Bundle demand to negotiate lower unit costs—e.g., a 15% cut on IT hardware for buying in bulk.
  • Standardisation: Uniform specs (e.g., one software platform across sites) reduce complexity and cost.
  • Cross-Regional Deals: Use your ANZ presence to secure region-wide pricing advantages.

Challenges to Watch

National Contracts require alignment across stakeholders—missteps can lead to resistance or poor adoption. Leveraging scale demands accurate spend data to maximise leverage.

Go-to-Market (GTM) Strategies

A robust GTM approach complements market testing and National Contracts.

GTM Tactics

  • Competitive Tenders: Regularly bid out contracts to keep pricing sharp.
  • Market Research: Use ANZ-specific data to inform negotiations.
  • Consolidation: Reduce supplier numbers to boost scale benefits.

Benchmarking for Savings

Benchmarking compares your indirect spend to industry or peer norms, exposing overpayments.

How to Benchmark

  • Internal Review: Analyse spend across departments or sites.
  • External Data: Use ANZ benchmarks to gauge performance.
  • Category Focus: Target high-cost areas like utilities or consulting.

Actionable Outcomes

If your facilities costs are 20% above average, benchmarking guides renegotiations or market tests.

Supplier Performance Management and KPIs

Suppliers can make or break savings. Weak oversight risks overbilling or poor value.

Key KPIs

  • Cost Metrics: Track pricing or total spend per supplier.
  • Service Levels: Measure delivery, quality, or compliance.
  • Innovation: Reward cost-saving ideas from suppliers.

Enforcement

Quarterly reviews and KPI-linked contracts keep suppliers accountable.

Impact

A supplier hitting 98% service targets might still overcharge by 15%. KPIs uncover this, enabling action.

Insourcing Activities

Outsourcing isn’t always cost-effective. Insourcing can cut indirect spend when internal options beat external rates.

Where to Insource

  • Routine Tasks: Cleaning, basic IT, or admin often cost less in-house.
  • Specialised Roles: Training staff to replace consultants saves long-term.

Trade-Offs

Insourcing needs upfront investment but can yield 15–20% annual savings after year one.

Reducing Scope

Cutting non-essential scope delivers quick wins.

How to Reduce

  • Prioritise Value: Focus spend on core outcomes (e.g., citizen services or customer experience).
  • Cut Waste: Cancel unused subscriptions or redundant services.
  • Right-Size: Match service levels to actual need.

How Trace Consultants Can Help

Reducing indirect spend by 15–30% is within reach with Trace Consultants. We bring:

  • ANZ Expertise: Tailored solutions for government and commercial sectors.
  • Proven Tools: From National Contracts to KPIs, our methods deliver.
  • Hands-On Execution: We implement, not just advise.

Our work with a multinational client proves it. Over 4 months, we:

  • Controlled scope creep in facilities.
  • Tested the market and onboarded alternative suppliers for professional services.
  • Secured a National Contract for travel, leveraging scale.
  • Benchmarked Corporate Services & IT spend for savings.
  • Benchmarked Property Services spend for savings.
  • Set supplier KPIs and insourced HR tasks.

The result? A 17% indirect spend cut—real, measurable impact.

Overcoming Challenges

Challenge 1: Resistance

Teams resist new suppliers or National Contracts.

  • Solution: We drive change with data and stakeholder buy-in.

Challenge 2: Data Gaps

Poor visibility hampers scale leverage.

  • Solution: Trace integrates systems for clarity and builds KPI dashboards for benefits tracking and ongoing supplier management.

Challenge 3: Transition Risks

Market tests or insourcing can disrupt.

  • Solution: We plan phased rollouts for smooth shifts.

Your Action Plan

Start cutting 15–30% today:

  1. Audit Spend: Map indirect costs by category and supplier.
  2. Set Targets: Aim for 15–30% reductions.
  3. Test the Market: Launch RFPs and explore National Contracts.
  4. Leverage Scale: Consolidate spend for discounts.
  5. Partner with Trace: Accelerate results with us.

The Bottom Line

For ANZ CFOs, reducing indirect spend by 15–30% is achievable with strategies like scope control, market testing, alternative suppliers, National Contracts, scale leverage, benchmarking, KPIs, insourcing, and scope reduction. Trace Consultants turns potential into results—just look at our client’s 17% cut in 12 months.

Ready to act? Contact Trace Consultants to transform your indirect spend strategy.