What is addressable spend?

Addressable Spend refers to the portion of a company's total procurement spending that is under the direct control and management of the procurement department. It encompasses the funds allocated for the purchase of goods and services that fall within the procurement team's purview. Addressable Spend typically excludes spending areas managed by other departments, such as capital expenditures or employee benefits.

This category of spending is strategically significant for procurement professionals, as it represents the pool of resources that can be optimized, negotiated, and managed to achieve cost savings, supplier consolidation, and overall procurement efficiency. Addressable Spend analysis involves identifying opportunities for strategic sourcing, supplier negotiations, and contract management to maximize the value derived from procurement activities.

Addressable Spend plays a pivotal role in shaping a company's procurement strategy, impacting supplier relationships, cost reduction initiatives, and the organization's overall financial performance.