Interview: Robust workflow architecture key to Spend Analysis exercise
A Procurement Organization’s spend data is usually stored in various databases and spreadsheets, often making it difficult to collate them into one coherent form for reporting purposes. However, Procurement Organizations can reap enormous benefits by bringing in much-needed visibility into spend patterns.
The importance of spend analytics has not gone unnoticed.
In January 2018, we ran a poll among users of Beroe LiVE, a community of thousands of Procurement decision makers, about the extent of their cost savings from the spend analysis exercise:
- A majority of them said they achieved cost savings of anywhere between 3 and 5 percent.
- Interestingly, nearly 15 percent said they have seen cost savings in excess of 10 percent.
Beroe recently interacted with SimPPLY, a spend analytics solutions provider based in Sydney, Australia, to gather insights on how best to reap the benefits of a spend analysis exercise.
What are the challenges involved in spend cleansing before implementing a spend analytics solution?
SimPPLY: The most important challenges are the availability and integrity of the data and its true level of granularity and completeness—these points were raised by many non-data-ready organizations who considered themselves not to be ready for a spend analytics solution. The other challenges are knowledge/ capability of where to find the right information and how to interpret and translate for compliance and meaningful decision drivers, both of which are often overlooked.
Once spend cleansing is done, what are the best practices to prevent data corruption so that the cleansing exercise does not need to be undertaken all over again?
SimPPLY: Good data and a robust work flow architecture model need to be established from the beginning. Development of a highly automated process around data cleansing should be implemented such that it provides repeatability and sustainability and assures data security and integrity, while other vulnerabilities are maintained with a ‘fit for purpose’ data solution. With these fundamental elements, decision makers can accurately achieve their business objectives with confidence and gain clearer insights on achieving better business performance.
How best to standardize taxonomy across an organization?
SimPPLY: Taxonomy should be ‘fit for purpose’ across the organization and needs to be agreed on within the business. It can stem from either something universal, such as UNSPSC or GS1, which is industry specific or something that has been customized. It must provide maximum contribution to and impact on the business decision-making process and be used as a lens to truly capture the overall business needs. It should be designed to accommodate the key information flowing horizontally from critical dimensions across the business at practical levels and should lead to clear and precise management decisions, providing transparency, supporting decision makers and promoting data integrity, leaving flexibility for ‘fit for future’ structural and non-structural change.
When most large companies have already invested in an ERP system, where is the need for a separate spend analytics solution?
SimPPLY: Traditionally, ERP systems for most companies are designed to capture core business process data and provide report outputs to cover core finance processes, auditing and decision making.
As the power of Procurement is increasingly realized for business sustainability and cost reduction, leading companies have realized the problems of moving focus and how inflexible ERP systems have become by accommodating Procurement’s needs and practices.
It is now a major challenge for ERP systems to cleanse and filter data from a Procurement perspective while maintaining strict and static data flow to maintain rules for finance. The focus of Procurement information relies on the use of different metrics that drive key decision making for behavioral and factual buying. Savings strategy is somehow fundamentally supported by deeper and wider data range compared to finance planning. A tailored Procurement analytics solution can also avoid overcomplicating business processes as a whole or further lead to non-necessary operating and finance burdens on the business.
How do we best calculate the return on investment for a spend analysis solution?
SimPPLY: In its raw form, “analyzed spend” provides insights into how your organization spends its money. This should provide internal teams with information on how to identify savings and manage compliance to contracts, inform category strategies, improve the efficiency of backend accounts payable, negotiate more effective outcomes with suppliers, engage stakeholders more meaningfully, track diversity and sustainability metrics or help build a business case, for example. A modest amount spent on spend analytics services is easily justified, especially when this likely has a lower cost compared with an analyst doing this work.
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