The summer of 2013 is the “Summer of Sourcing” on CPO Rising, as we deliver a slew of sourcing-related articles on a wide variety of topics that fall under the sourcing banner. Today, our focus is on sourcing and spend analytics, two key tools in the multi-faceted arsenal of the Chief Procurement Officer.

We should also note that Ardent Partners’ State of Strategic Sourcing 2013 Report is now available by clicking here (registration required).

In business and in life, there is fear of the unknown. Conversely, there is great value in knowing (or at least anticipating) the future. Today, as many companies struggle to figure out “what’s next” for its business and its markets, they also struggle to measure and evaluate the performance of individual units / divisions. In that context, the phrase “the more you know…” is a calling card that can help drive superior performance across all avenues of the organization and the tools that enable this become highly valuable to corporate and division executives and serve as the gateway to greater value.

One way that leading CPOs and their teams serve as a conduit for organizational success is to provide line of business executives and functional peers with strategic, educated and action-provoking intelligence. And, as every procurement executive has realized by now, spend analysis is the path for this information.

If contracts can be considered the “lifeblood” of an organization, spend analysis would be the foundation of knowledge within the average enterprise. There is a groundswell of veritable, valuable and actionable data sitting within the walls of every enterprise; it’s just a matter of getting it out, cleansing it…and, eventually, using it for the greater good of the company.

For Best-in-Class sourcing organizations who are the companies that consistently overachieve when it comes to savings and formal sourcing volumes, spend analysis is not just a heavily-leveraged tool to drive organizational value and intelligence, it’s an area in which top-performing enterprises are linking more directly to corporate innovation.

Top-performing sourcing organizations are 43% more likely than all other companies to have spend analysis integrated into a larger strategic sourcing or supply management technology suite. While spend analysis is quite effective on its own for supporting the procurement function (and remains miles ahead of any simple Excel-based or manual program / homegrown system for extracting and analyzing spend data), having analytics connected directly to contract management and eSourcing technology can result in significant benefits, including superior visibility into corporate spend, full backing of all critical sourcing processes (intelligent negotiations, contracting and execution of bids) and, typically, higher cost savings.

Spend analysis remains one of the most useful tools in the CPO’s toolbox and providers like Ariba/SAP, BravoSolution, and Zycus are three of the companies that offer their spend analysis solutions within a larger suite. Organizations that are currently leveraging even the most basic aspects of this tool and process are greatly servicing their spend management efforts. Those that are taking an innovative approach to this tool, however, are driving the most value.

While spend analysis helps sourcing teams understand the past to make smarter decisions in the present that ultimately drive better perform in the future, sourcing teams have other analytical tools that can be used to improve future results.

One of the ultimate strategies to optimize value in complex sourcing efforts is to be able to perform complex scenario analysis of competitive supplier bid information. This type of analysis can help groups test or model possible future demand and/or market behavior and other factors to better contract with the highest value supplier(s) on the most beneficial terms available in the market.

Best-in-Class companies are 62% more likely than all other organization to utilize optimization-based sourcing analytics to support their sourcing efforts. These capabilities are often delivered as an extension of an eSourcing platform like those offered by CombineNet, Iasta, and BravoSolution and serve as a gateway to value by fusing real-time intelligence into the sourcing award evaluation process.

Tagged in: Solution Providers, Sourcing, Sourcing Optimization, Spend Analysis, Strategy, Technology