Spend visibility is the start point - Identifying what the true spend is, is critical

Published September 2014

The rise of easy-to-use procurement tools is democratising procurement. Once upon a time procurement was a department that you went to because you were forced to in order to make a purchase. Other departments resented procurement as they felt it got in the way. Organisations now want better control and they are increasingly looking to control risk. There is intensified pressure to have access to more real time, accurate data to provide visibility and to be able to make sensible decisions. Procurement professionals are now starting to be viewed as ‘supply chain innovators’** empowered by access to “big data” which is helping them make better informed decisions. Lack of knowledge and silo mentality causes the problems. People think they are buying well or using the right suppliers but with data and shared information they can see they can improve their decision-making. Inertia is another problem. A head of pharmaceuticals procurement for a large group illustrates the problem, he said: “We think we spend between 50 – 250 million euros on certain categories of products, but we just don’t know.” Lack of data, lack of visibility coupled with an overwhelming feeling of just not knowing where to start, meant that the unnecessary bleed of company money had continued for far longer than it need have. The focus should be on helping companies gain visibility of their true spend across multiple geographies and business units and help them assess and identify their expenditure in real time across the whole supply chain. Procurement has, traditionally, been seen as the poor relation BUT, as it becomes harder and harder to squeeze out more sales to drive growth and margins, companies are discovering that they need to be buying more efficiently. So procurement will become a more and more recognised and valued function in business to rival sales and marketing. It will balance up. In 25 years’ time, organisations will still have really polished, professional, robust sales and marketing functions and Procurement will be on the same level and recognised as such. This will be brought about by an explosion of actionable data that is meaningful, relevant and time. Data that you can actually do something with. CPOs can start taking action and making use of the goldmine of data they have at their disposal by:
  1. Playing with procurement talent - introducing procurement experts to analytics so that data is focused on delivering meaningful insights that support the priorities
  2. Looking to the source - getting value from data starts and ends with its sources so it's important to understand your own data and also third party sources available to supplement and extend range of vision.
  3. Starting the clock - big data projects can spiral in complexity and scope. Start small - deliver something quickly before the business users lose interest.
  4. Managing expectations - choose specific domains in which to begin, focusing on places where people are most knowledgeable.
  5. Practicing good hygiene - big data is still data and you will still need data disciplines. Core data management, master data management, integration and stewardship are important - even for the small domain slices upon which early efforts are focused.
  6. Staying on target - before you can determine the right questions to ask, you will need to illuminate the possible questions that could be answered, then define priorities and metrics to assess what changes could be enacted based on insights.*
Sources: *Deloitte Global CPO Survey 2013 [taken from 180 Chief Procurement Officers from 17 countries] **Futurebuy: The future of procurement; 25 in 25, delivering procurement value in a complex world; KPMG