is a common practice leveraged throughout the procurement world. But most organisations – even some of the world’s largest and most respected – fail to take a holistic-enough approach to drive lasting value and savings.
The problem: a lack of big data management. Odds are, your procurement team is sitting on a wealth of hidden data buried in incompatible systems across various departments in your organisation.
According to Gartner, in 2015, 85 per cent of Fortune 500s will still fail to use big data to drive profitability, productivity and efficiency. Procurement contributes to this lack of progress through limited data sets, process inconsistency and inflexible analytics.
This three-prong problem leads to a lack of adoption – users aren’t confident in the quality or accuracy of spend analysis results, so the technology is underused.
By widening the scope of the spend data that’s regularly analysed, increasing the frequency and moving toward real-time refreshes, procurement can uncover more robust savings and elevate its position as a business driver.
How do you define spend data?
Good data is hard to find. Traditional spend data encompasses purchase orders, contracts, expenses and invoices, but supplier KPIs, procurement plans and forecasts and key commodity information are often ignored – left in separate databases – or worse, scattered in file cabinets.
Expanding the scope of the data you analyse beyond the traditional may be difficult, but it’s well worth it. By taking a more holistic approach, procurement:
- Extends the value prop to strategic planning, supplier performance monitoring and risk improvement
- Widens the user base within procurement and contributes to marketing, finance and other departments
- Repeats waves of success beyond original opportunities.
You can integrate all the data you want, but unless it’s current, the value is immediately diminished.
The CFO just stormed into your office – he wants a savings report on his desk by close of business –not by the end of the quarter as you expected. Can you report savings in real time? Can you justify your team’s investment?
Today, most companies only incorporate spend analysis as annual or quarterly benchmarks, limiting effectiveness of reported savings. Moving toward real-time data refreshes allows procurement to red-flag poor supplier performance that will impact savings, ensure contract compliance across categories and departments and improve the quality and accuracy of spend analysis.
Coupled with improved analytics, this timely pan-procurement approach creates a comprehensive resource for users both inside the procurement function and across the organisation.
The bottom line
Spend analysis is too often a once-a-year activity and limited in scope – think of this as looking at snapshots from someone’s holiday – you have a picture without the context or the experience.
By taking a more holistic approach to spend analysis, procurement benefits from better decision making with the most up-to-date facts, realised savings up to 40 per cent and the ability to quantify progress at every stage in the procurement life cycle.
While the savings are noteworthy, the impact of spend analysis reaches beyond cost cutting – it can become the cornerstone to procurement’s ongoing transformation and continuous improvement.
☛ Richard Hogg is the general manager for the UK at BravoSolution.