The future of procurement excellence: turning financial data into actionable insights
Spend analytics - where to start?
For large and complex organisations, making sense of available spend data usually comes with significant challenges.
The data is often scattered, globally, throughout different systems. It may contain different languages, currencies and use different names or codes for similar items.
Multiple systems, multiple data sets, multiple companies, multiple subsidiaries, multiple charts of accounts, acquisitions, diversifications, restructures….
...for many businesses just bringing all of this data together can seem like a daunting task.
Head of North American Procurement, Top 30 international law firm
Our spend data sits at a country by country level. Each country has its own method ranging from basic ERP's to extremely basic paper invoice systems. You're talking about a major project just to get access to everything we need. In theory there are good opportunities to consolidate and create big enhancements in procurement but we are essentially going about this blindfolded without visibility of spend
And this is only the beginning of the issue…
There is a gulf of a difference between conducting a spend analysis and creating the actionable insights that are required to inform excellent procurement decision making.
Whilst transferring financial data into a centralised spend analysis system might seem like a logical exercise, if the data that goes into it is poor and unhelpful then the output – no matter how impressive or expensive the system - will remain poor and unhelpful.
In essence, all of your spend is visible in one place, but frankly, so what?
Chief Financial Officer, medical device manufacturer
Knowing exactly how much we spend on packaging is a helpful starting point...but having the facts that tell us that our packaging spend is dispersed across multiple suppliers, our costs are rising whilst the cost of polyethylene has decreased and the currency index has provided an effect in our favour provides the clear, actionable insight we need to reduce costs
Technology is not, in itself, the answer to this issue
Organisations continue to invest large sums in expensive technology and spend analytics systems. But as mentioned, an input of poor data will produce a poor output and fail to create the insights required for procurement excellence - no matter how expensive the technology being used.
Getting the data piece right – if done correctly – requires specialist resource, very possibly in the form of consultancy support.
It is that intellectual analysis, combined with excellent spend analytics that are proving a powerful combination in some of the most innovative firms right now.
Bringing this to life
A Private Equity owned manufacturer and distributor of products for the diagnosis, treatment and monitoring of respiratory conditions, with a global turnover of over $800 million wanted to create complete transparency of its spend.
This would require the construction of a spend analysis with data input from a large number of individual countries, subsidiary companies and factories around the world.
A specialist external procurement partner was selected to help build this.
The first task was to collect and combine multiple data sets from around the world.
Once cleansed and validated, a bespoke categorisation was developed and the spend data categorised.
A uniquely created Spend Analytics Platform was used to give complete transparency of global spend; by subsidiary, business unit and cost centre and by supplier, supply market category and contract.
The data was also delivered back into the client’s own Tableau reporting tool with structured data architecture to enable ongoing spend mapping.
The output was three fold:
- For the first time in its history, the business achieved complete visibility of all supplier expenditure including direct and indirect spend.
- Crucial 'value add' was created through expert consultancy input - helping to turn basic spend intelligence into actionable insights. A programme of activity to deliver a substantial 7 figure cost saving was planned.
- Stakeholder buy-in to the cost reduction programme was further encouraged by the fresh ability to be able to accurately examine the spend profile and opportunity for enhanced procurement
VP, International Finance
We created a complete view of our spend with a highly sophisticated view on areas for savings - it was a bit like having the lights turned on for the first time
Points to consider
- Creating excellent spend analytics can be a challenge but is possible given the right resource
- It isn't just about technology - its about turning financial data into actionable procurement insights. In many cases this will require expert consultancy support
- Getting it right can be an excellent way of identifying quantified opportunities for savings and engaging stakeholders in any programme of cost reduction