Every activity in our personal and professional lives creates a data footprint. All this information builds up and is stored somewhere, but it often languishes and isn’t always tapped into. Sometimes the hardest thing is knowing where to start with it all as it can appear overwhelming.
Your spend ecosystem contains valuable data which can be accessed, if you know where to forage. Spend Analytics generates insight back into your procurement processes so you can continue to drive cost savings.
Reasons to consider Spend Analytics for your organisation
“Spend Analytics is one of the truly core competences of procurement organisations.”
The Future of Procurement Demands Smarter Spend Analytics – Spend Matters 2016
As with most things, spend management can be approached in a cyclical way – you evaluate your current spend, employ methods to improve performance, then evaluate your spend again so you can continue to improve your cost management.
Data insight enables you to rapidly identify quick wins that go straight to the bottom line. It also generates vital information to drive the strategic planning of your procurement processes. This should be at the core of your business so it can have positive long-term value for all elements of your organisation.
A common challenge many procurement professionals face is that spend data is in silos across the organisation. Not a problem, as we can help you consolidate it into a clean, classified data set that forms a robust platform for full benefits realisation.
The best way is to look at this from multiple levels:
1). Quick wins
This the easiest place to start, the low-hanging fruit, which can generally be discovered fairly quickly and acted upon.
This includes the following:
- Payment terms
- Purchase price variance
- Maverick spend
- Missed rebates
Once you have made your first move into Spend Analytics, you will already be starting to realise some of the benefits and will be starting to look at the bigger picture.
Moving along the chain, in terms of complexity and where the bigger impacts can be realised, the following can start to be tackled:
- Tail rationalisation
- Contract negotiation
- Spend avoidance
- Sourcing opportunities
- Specific interventions such as Scope 3 Emissions reporting
Keeping your eye on the prize, taking a long-range view will lead to significant savings being realised but these won’t happen overnight and will need to be built up and managed over time.
This includes the following:
- Category management
- Supply chain risk
- Payments strategy
- Demand planning
What are the challenges I need to be aware of?
There will be challenges that you will encounter as you continue to drive change within your business from the information that you can find from Spend Analytics.
Some of these to be aware of and how they could affect your results:
- Data – whilst you will have amassed a great deal of data, being able to extract this data and then do something meaningful with it, won’t be straight-forward. Having the ability to extract this data, from multiple systems and then get this into a rationalised form so you can make sense of it, is key to making the best decisions on your data.
- Taxonomy – being able to classify your spend to a schema that is relevant to your business is important and this is something which should be done at the start of any project, so you have access to meaningful data.
- Security – the security of your data is paramount as by definition it’s commercially sensitive.
- Learning – having the ability to run analysis on your data is one thing but having a system that learns from your results is key. Most solutions are ‘rules-based’ and so are slow and costly to maintain. If you use a spend analytics solution which utilises artificial intelligence (AI), the solution will recognise data relationships and will teach itself.
What’s in the tail?
Tail Spend Management continues to come up frequently and is a hot topic – how can organisations achieve better efficiency and effectiveness, as well as savings from the ‘final 20%’ of spend?
Addressing this can be a big challenge, with many different solutions offered, but traditional approaches are unlikely to have a compelling business case.
How to Unlock the Hidden Value with Spend Analytics
The right solution for your organisation, is one which provides you with rapid, actionable results tailored to your taxonomy and industry. An out-of-the-box solution that forces a classification structure on you and uses rigid rules will not provide you with the in-depth analysis that you need.
You need to look for a solution which provides you with the following:
- Speed, accuracy and line level detail – the data is already in existence so getting access to this, accurately and to a great level of detail is important
- Rapid Return On Investment – you should expect to see a budget impact within weeks so you can start to make those all-important savings
In a competitive, data-driven world any delays in this process means that you can lose out on opportunities and savings that could have been garnered quickly.
They say that ‘information is power’ and Spend Analytics is a critical step to put you in the driving seat and create a robust strategic procurement plan.
By Dr. Jonathan Betts, Market Development Director at Science Warehouse
For more information, read about how our Spend Science solution could help your organisation.