Middle-market EBITDA is hiding in spend categories nobody has looked at enterprise-wide. Start with the three that always pay for the exercise: parcel and freight, software and SaaS, and MRO. Consolidate spend, normalize vendor names, separate price from consumption, benchmark, RFP, then measure realized savings against a controlled baseline. A 12-week sprint on the right three categories typically returns 8 to 15 percent of addressable spend.
Every middle-market portfolio company has an EBITDA opportunity in procurement that has never been touched. Not because leadership does not care. Because nobody has ever pulled all the spend together and looked at it as one number. The savings are not sophisticated. They come from aggregation, price benchmarking, and eliminating vendor fragmentation. This is where a CFO should look first.
Why fragmented spend is the middle-market pattern
Companies under $250M in revenue almost never have a chief procurement officer. Spend decisions get made by department heads, plant managers, and IT leads, each buying from the vendor they know. Over five years the company ends up with 14 uniform vendors instead of 2, 8 telecom carriers instead of 1, and 47 SaaS tools with functional overlap.
Grant Thornton’s 2025 Middle Market Report pegged the average number of vendors per $100M of spend at a mid-market industrial company at 1,240. The top 20 vendors account for around 40 percent of spend. The bottom 800 vendors account for another 20 percent. That long tail is where the money is, because nobody has ever bid it.
Where to look first: category attractiveness
Not every category is worth a sourcing effort in month one. The ones that pay for the whole exercise share four traits: high dollar spend, low switching cost, competitive supplier landscape, and price transparency. That gets you to a short list fast.
| Category | Typical mid-market spend | Savings range | Effort | Time to realize |
|---|---|---|---|---|
| Parcel and freight | $400K to $6M | 12 to 22 percent | Medium | 60 days |
| Software and SaaS | $600K to $8M | 15 to 30 percent | Medium | 90 to 180 days |
| MRO (maintenance, repair, operations) | $300K to $4M | 8 to 18 percent | Medium | 90 days |
| Telecom and connectivity | $150K to $1.5M | 18 to 35 percent | Low | 60 days |
| Uniforms and facility services | $120K to $900K | 10 to 20 percent | Low | 45 days |
| Industrial gases | $200K to $3M | 8 to 15 percent | Medium | 90 days |
| Couriers and same-day | $50K to $600K | 15 to 30 percent | Low | 30 days |
| Print and marketing services | $100K to $1M | 12 to 25 percent | Low | 45 days |
The three categories that pay for the whole exercise
If you can only run three sourcing events in the first quarter, run these:
1. Parcel and freight. Nobody has bid it. The incumbent has been quietly raising rates 4 to 7 percent a year through fuel surcharges and dimensional weight rules that got harder over time. Pull one month of shipping data, feed it to two other carriers plus the incumbent, and you have a 15 percent number in 60 days.
2. Software and SaaS. Every portfolio company has bought Zoom four times, Adobe twice, and DocuSign under three different vendor names. Consolidation and rationalization is usually a 20 to 25 percent number. See the piece on software rationalization for PE-backed companies for the full playbook.
3. MRO. The maintenance supplier bill in a light-industrial or manufacturing setting is death by 800 line items. Consolidate to two distributors, sign a rebate agreement, and you save 12 percent without changing what anyone does.
The 8-step sourcing framework
Step 1: Consolidate spend
Pull 12 months of AP by vendor. Every entity, every ledger, every subsidiary. Do this in Excel or Power BI, not in a procurement tool. You want the raw ugly version.
Step 2: Normalize vendor names
“UPS,” “United Parcel Service,” “UPS Freight,” and “UPS Supply Chain” are one vendor. You will find 20 to 40 percent duplicative entries when you actually clean the master. This step alone changes the picture.
Step 3: Identify fragmentation
By category, count vendors. If you have 14 uniform providers, that is fragmentation. If you have 3 telecom carriers, that is fragmentation. If you have 47 SaaS tools, that is fragmentation.
Step 4: Separate price from consumption
This is the step everyone skips. You are not just paying too much per unit. You may also be consuming more units than you need. On parcel: are you shipping ground when standard delivers on time? On SaaS: how many licenses are unassigned? On print: are you shipping overnight when 2-day would work?
Step 5: Prioritize
Not every category is worth a formal sourcing event. Rank by spend x savings potential, minus switching cost. Kill anything in the bottom quartile. Focus on the top 3 to 5.
Step 6: Benchmark
Every priority category has published benchmarks. Sponsor operating partners have benchmark data across their whole portfolio. Ask. If you cannot get it, three quick vendor conversations with a redacted spend profile will get you 80 percent of the answer.
Step 7: RFP
Structured, not open-ended. Three vendors minimum. Same volume assumptions, same service specs, same contract terms. Award on total cost, not headline unit price. Include implementation cost in the analysis.
Step 8: Track realized savings
This is where 60 percent of sourcing programs fail. Signed contract savings and realized P&L savings are different numbers. You need a controlled baseline (spend at old prices) and monthly tracking against actual invoices. If you cannot see realized savings in the P&L within 90 days, something in step 4 or step 8 is broken.
What sponsors want to see
PE operating partners have a standard sourcing scorecard: number of categories in scope, contracted savings, realized savings, and vendor count reduction. They know that contracted savings is a soft number. Realized savings hits EBITDA. So report both.
Format the monthly update as: category, addressable spend, contracted savings percent, realized savings dollars YTD, forecast full-year realized. Four columns. That is what shows up in a Bain PE Report benchmark, and it is what sponsors compare against their other portfolio companies. Bain’s 2026 Global Private Equity Report noted that top-quartile portfolio companies realize 65 to 80 percent of contracted procurement savings within the first 12 months.
Where this connects to QoE
At exit, buyers will scrutinize every cost adjustment. Procurement savings only survive the buyer’s scrub if they are documented: RFP files, signed contracts, invoice comparisons showing the run-rate at the new price. If the savings are real, keep the paper trail as you go. See add-backs and QoE for what actually survives buy-side diligence.
Common failure modes
- Consolidating vendors without changing spec. Awarding 100 percent of parcel to one carrier without renegotiating fuel surcharges and dim-weight rules gets you 5 percent instead of 15.
- Killing the incumbent’s motivation to counter. If you already know you are switching, the RFP is a formality. If you might stay, the incumbent will match or beat.
- Not owning implementation. A signed contract with no owner to switch shipping labels does not save money.
- Reporting contracted savings as realized. Sponsors will notice. Do not conflate.
- Starting with the biggest category instead of the easiest. A quick 60-day win on couriers builds credibility to run the harder telecom RFP in Q2.
Push back on this.
Every operator’s situation is a little different. If you run this differently, disagree with the methodology, or think we got something wrong, tell us. We publish the best counter-approaches on our Reader Contributions page, credited or anonymous, your call. Email hello@thepragmaticcfo.com.
FAQ
Do I need a procurement hire to run this?
Not for the first three categories. A finance analyst plus a project sponsor from ops can run parcel, uniforms, and couriers. After that, a procurement hire pays for itself.
What if we do not have clean AP data by vendor?
Then step 1 is fixing the data. This usually takes 3 to 5 weeks. Do not skip it. Every downstream number depends on a clean baseline.
How do I get the operating partner to fund the effort?
Show the sponsor the top 3 categories with a mid-point savings estimate, the effort in weeks, and the expected realized savings by quarter. Most operating partners will fund a $50K to $100K sourcing consultant to accelerate.
What about direct materials?
Direct is a different animal. It touches product cost, quality, and supply. Do not run direct materials sourcing in the same sprint as indirect. Sequence direct after you have the indirect wins on the board.
How do I make sure savings actually hit EBITDA?
Freeze the pre-sourcing spend as the baseline. Track monthly invoiced spend against baseline. Report the delta in the MBR pack. If the operating budget for the category does not come down, the savings are theoretical.
Sources
- Grant Thornton, “Middle Market Report,” 2025
- Bain & Company, “Global Private Equity Report,” 2026
- AlixPartners, “Operational Value Creation in PE,” 2025
- McKinsey, “The Next-Generation Operating Model for Procurement,” 2025
Written by The Pragmatic CFO. 15+ years running FP&A and finance operations across PE-backed portfolio companies.
The Pragmatic CFO 