9 July 2013 | Andrew Allen
Andrew Allen explores the ways organisations can take advantage of consistent and detailed statistics.
It was Socrates who said: “The more I learn, the more I learn how little I know.” When it comes to spend data, modern buyers sometimes seem to feel the same way.
Talk to buyers about the vast amounts of spend data made available by modern e-procurement platforms and it isn’t long before someone cites the adage “garbage in, garbage out”.
“The problem isn’t extracting information from the accounts payable file, it’s the quality of data being input in the first place,” says Guy Allen, former Fujitsu CPO and now owner of the Real World Sourcing consultancy.
“Getting people to input that data throughout an organisation so you can collate and categorise it is a major challenge,” he said.
A recent report Practical Steps to Improve Management Information in Government, identified improving the quality of data being input across UK central government as one of the keys to better managing spend. The report by former Logica CEO Martin Read, said “variable” quality of data across Whitehall was an obstacle to making direct comparisons between spend areas. He called for stricter guidelines and controls around how management data is collected and stored by departments. “It is important that the metrics and their definitions are not subject to constant change so that trends and variances are clearly visible over time,” said the report.
Ensuring consistency of input – and therefore output – is a conundrum modern P2P systems are increasingly seeking to address, in many cases with increasing success.
Malcolm Preston, associate director of procurement, County Durham & Darlington NHS Foundation Trust, says: “We now have clean, accurate data for the whole trust, which gives us access to real-time information.”
Preston, whose trust uses the ‘web3 P2P’ platform from Wax Digital, says: “In the past, we were reliant on data from suppliers, but now we have the technology and systems to produce our own in-depth information and single version of the truth.”
At a recent roundtable discussion held by Procserve – provider of a public sector e-procurement platform – senior public sector buyers looked at some of the implications of the increased spend data available to modern procurement professionals.
“Historically, procurement professionals have had to use data sets that are batch-processed, returning an analysis 15 months later,” said Nigel Clifford, CEO of Procserve, which is used by organisations such as the Department for Work and Pensions. “They’re not hugely helpful in real-time decision making.”
But systems increasingly facilitate the inputting of precise rather than generic product description, which can generate real-time information, he adds. “If you’re at the centre of a network – for example, the Cabinet Office within central government – it’s possible to ascertain which suppliers are absorbing a lot of volume and prices, which can vary enormously across the public sector,” Clifford says. “It gives the opportunity to look at prices charged through time and in different circumstances. Is a local school being charged a different price to a local police force for the same product, for example?”
The advantages of modern e-procurement systems have not been lost on private sector buyers either. “Information is power. I’d always want my buyer knowing more than the salesman they’re going to meet. Good-quality data means you’re able to have a perspective how a supplier might view your spend and enables you to keep an eye on changing spending trends with the suppliers,” says Allen.
Steffen Klewitz, senior procurement manager and vice president, global procurement organisation, SAP, uses an iPad with a 360-degree supplier dashboard to support internal discussions. “It gives you data on the fly and a real edge when it comes to persuading colleagues why your argument is right,” he says.
The discussion at Procserve’s roundtable, which was held under the Chatham House rule, discussed how future systems might come to provide qualitative as well as quantitative data, such as by encompassing customers’ experiences with suppliers.
They also have the potential to provide interesting data on questions such as when does it become pointless to establish economies of scale with a single supplier who is no longer able to charge less without going below their own cost price?
Attendees discussed the kind of safeguards which needed to be put in place to guarantee that spend data was not taken out of context and used as a rod to beat procurement’s back. “You may have a local authority which decides to pay 20 per cent extra for a particular service because by doing so they are able to keep that service within the borough,” says Clifford. But there is a risk internal stakeholders or the media might use that spend data to claim that the local authority was paying over the odds for a service without fully understanding the background to the decision.
The roundtable also discussed how to ensure there was proper governance over how this data is used. Participants even considered there could be a possible role for the UK’s National Audit Office in governing how spend data was used.
Another issue raised as systems become more capable is whether their operators can keep pace with the potential they offer. Klewitz, a data analyst by background, says modern buyers dealing with high-specification e-procurement systems increasingly require a combination of numeracy and IT skills plus the commercial acumen to be able to exploit the data they extract. “Generation Y has a definite advantage when it comes to these skills. They’re used to extracting the full complexity out of social media platforms and other tools and that really helps them,” he says.
But Allen finds that not only are modern buyers often lacking the strong analytical skills to see the patterns in numbers and get the answers, he believes younger buyers are actually less able to make use of spend data.
“Spend data was difficult to come by in the past, which forced buyers to dig deep to find it. Now there’s so much information people don’t do the analysis themselves, they see if they can find it on Google,” he says.
Buyers of the future
Klewitz of SAP says there is a clear demand for procurement professionals capable of using high-specification e-procurement systems.
A combination of numeracy and IT skills as well as commercial acumen to be able to exploit the data they extract is essential for this kind of buyer, he adds.
“Imagine if you have a data cube with 10 different dimensions such as country, category, suppliers and others, the number of different ways you can cut the combinations of data from this is enormous,” he says. “If you don’t have an idea how to structure what you want to know, you can easily get lost with so many possible combinations.”
Clifford believes while future procurement professionals will require greater numeracy skills, he doesn’t think that data analysis requirements will lead to the advent of the mathematician/buyer. Instead, he believes the systems themselves will become considerably more user-friendly.
He draws a parallel between present generation e-procurement systems and the early days of online search engines. “In the early days, search criteria had to be very specific,” he says. “Now we have much more intelligent search engines. We’re on the march from that perspective.”