Spend data visibility is a challenge
Visibility into spend data has been an area that procurement has traditionally struggled with. In fact, according to the Deloitte annual Global Chief Procurement Officer (CPO) survey as many as 65% of procurement leaders have limited or no visibility beyond their tier-one suppliers. For many CPOs, the tradeoff between value and time is a main reason why they haven’t invested more in spend data visibility. But, we have seen that businesses who don’t have full visibility into their spend data ultimately pay the price in cost savings, compliance and risk. Procurement leaders must address the processes, training, and technology solutions that inhibit their ability to benefit from complete spend data visibility.
Until recently, procurement data has typically been siloed due to isolated technology solutions and difficult data extraction. This meant that spend KPIs were separate from supplier analytics and contract data, however, advances in technology have made it possible to harness all these types of data on a much larger scale. For procurement, this offers opportunities for more informed decisions in purchasing, managing risk, and cost reduction.
Traditionally, optimizing spend data was extremely costly and inefficient because it was highly manual and, in many instances, involved paper contracts. But with the boom of new procurement software platforms and tools, there are many new strategies to not only collect spend data but also analyze it. With the power of full visibility and control, procurement teams can not only save time and money, but they can also reduce risk and even potential fraud. This increased visibility into spend data also helps agility. When a team can identify unnecessary spend, they are more informed about where they can re-allocate this money.
The new tools for spend data visibility provide procurement teams with insight about their historical spend and therefore savings in the future. By leveraging advanced business intelligence and artificial intelligence tools, procurement teams are able to efficiently identify new cost savings opportunities. Without automated technology solutions and the insights they deliver, procurement teams will miss out on the transformative nature of AI and machine learning as well as the cost savings and fraud reduction that go along with greater visibility into spend data and risk getting left behind.
Processes and training
As with any gaps in data visibility, businesses begin by understanding how to capture and merge all existing data sources and then fill the gaps with data that is not currently available. To achieve full visibility into spend data, procurement departments must first lay a foundation of a strong data analysis strategy. This allows organizations to be more flexible in how they can harness data in more strategic ways.
In order to optimize new technology and well-trained procurement teams, there are many processes and operational issues that must be considered. First and foremost is properly addressing mis-categorized spend, which results in damaging the integrity of the data analysis insights. When 65% of procurement leaders acknowledge having limited or no visibility beyond their tier-one suppliers, it’s clear that better processes that are more comprehensive and data-driven are needed.
Another step towards optimizing processes is ensuring that workflows are streamlined. This means no matter the team or department, every person who touches spend data must work within the same database and input their data the same way.
Advances in procurement technology come with a greater need for skilled procurement professionals who are able to conduct sophisticated analysis using data from internal and external sources through technology.
However, “51 percent of procurement leaders do not believe their current teams have sufficient levels of skills and capabilities to deliver on their procurement strategy and just three percent of procurement leaders believe their staff possess all the skills required to maximize use of digital capabilities.”
While the increase in automation of the procurement industry has sparked fears that workers may lose their jobs to computers, this fear is mostly unfounded. In reality, automation empowers procurement teams to focus on other critical thinking tasks and build stronger technology foundations.
High-functioning processes and team skills that improve visibility in spend data can ultimately inform new processes that impact your greater organization. This could mean investing in a new eProcurement system or consolidating invoices from suppliers and other decisions that benefit your bottom line.
It won’t happen overnight
The transformation of your spend data visibility will not happen overnight. But a roadmap that includes training your staff, evaluating and optimizing your current processes and investing in new technology systems have clear benefits. Improved visibility requires an organizational buy-in and a mindset change from team members at all levels. Fortunately, the benefits of increased visibility are clear. Spend visibility is necessary for strategic sourcing and checking unmanaged spend.