Antonie Philips van Leeuwenhoek (1632 – 1723), was a Dutch tradesman and civil servant who began a new career as a scientist at a very late age. Despite his late start, van Leeuwenhoek, in a relatively short span of time, made many extraordinary discoveries including bacteria, blood cells, single-cell organisms, and many other objects too small for the naked eye. Van Leeuwenhoek was a master of the scientific method which would include an expertise in both the process of designing and executing his experiments and in the analysis of his results. His first discovery, the “modern microscope,” helped to differentiate his research methodology and to distinguish his research results from those of his peers because he was able to literally see things that they could not. By marrying unparalleled visibility with strong analytical capabilities and process expertise, van Leeuwenhoek changed the course of scientific history with discoveries so radical for his time that many widely-accepted beliefs were changed overnight. His work was so historic and so prolific that he is commonly regarded as the “Father of Microbiology.”
van Leeuwenhoek’s Formula for Success
On its face, van Leeuwenhoek’s formula for success, which can be defined as:
Visibility + Analysis + Process = Success
has broad applicability to today’s business operations since deliberate processes powered by rich insight that is drawn from clear context seem much more likely to succeed than other methods. In the realm of supply management, the blueprint for Best-in-Class sourcing, which benefits from visibility into enterprise spend, process rigor, and strong analytical capabilities, follows van Leeuwenhoek’s formula. Since sourcing remains a primary lever for Chief Procurement Officers (CPOs) and their departments to achieve savings, the need for sourcing professionals and sourcing teams to source more efficiently and source more effectively should continue for years to come. Fortunately, this necessity requires no invention: the tools and processes already exist. Spend analysis and sourcing are both well-documented processes and tools that automate these processes have been available in the market for more than a decade.
Visibility: Spend Analysis
Spend analysis is both the name of the process used to collect, cleanse, enrich and analyze enterprise spend data and the name of the tools that help automate the process. Visibility into enterprise spend is the desired output of spend analysis and helps procurement departments understand what money is being spent with which suppliers and on what categories. Spend analysis can help sourcing teams identify non-compliant spend and opportunities for savings via spend aggregation and/or supplier rationalization. Procurement departments with enterprise-level spend visibility have a truly powerful asset that can be used to drive strategic planning, refine operational focus, and improve business results. Simply put, spend analysis is the foundation upon which Best-in-Class procurement departments are built.
Analysis: Data, Category, and Supply Market Expertise
Visibility into enterprise spend that is timely, well-organized, and accurate (or enriched) can be an extraordinary asset to any sourcing group. But the value that can be extracted from this visibility is only as significant as the ability of that group to analyze the spend, make the right plans, and take the right actions – to assess, identify, prioritize, and then execute the right opportunities. Understanding the different categories of spend and the supply markets that feed these categories are also critical to developing the ideal sourcing strategy. To consistently derive full value from spend visibility, sourcing teams need a blend of three types of analytical capabilities or expertise: data analysis, category management, and supply market expertise.
Process: Holistic, Standardized, and Automated
Procurement departments that succeed in the consistent execution of their sourcing projects are the ones that take a holistic approach to the entire sourcing process and leverage process automation tools across it. Leading departments define their sourcing process as one that begins with opportunity identification and carries through contract execution and seek to standardize their sourcing policies and processes at the enterprise level.
Success: Top Results, Sustainable Performance
Whether a team is developing a sourcing pipeline for the upcoming year or responding to a new requisition, the decisions made by Best-in-Class sourcing programs are data driven (Visibility) and informed by market knowledge (Analysis) and follow processes that are standardized and rigorous, yet streamlined by the use of automation (Process). Some of the areas where these leaders see superior results include savings, as well as contract compliance and maverick spend rates (improvements in contract compliance and reductions in maverick spend positively impact savings); all of which should have particular relevance to the average Chief Procurement Officer whose departmental performance is heavily weighted on savings contribution. Improved visibility from spend analysis also helps a procurement department extend its influence and impact on the larger enterprise by helping to increase the amount of spend placed under its management.
Once procurement departments begin operating their sourcing programs at a high level, the challenge is to sustain program performance while also expanding its scope. Investments in the tools that automate the process are the primary way to scale the program without significant investment in staff and third-party support. The value of tightly integrated and automated processes cannot be understated. Leveraging spend analysis directly into eSourcing projects that result in automated contracts with suppliers whose performance is then actively measured can help to rapidly broaden the scope of a sourcing program to include more spend and improve operational effectiveness and overall stakeholder engagement while driving significant performance improvement.
Sourcing for success will be a major topic at CPO Rising 2017, Ardent Partners’ procurement executive summit, to be held at the Harvard Club of Boston in the historic Back Bay on November 8 & 9. Join us and 125 procurement leaders and practitioners for this exclusive event and learn the formula the works for you!