Ardent Partners is pleased to announce the publication of The State of Strategic Sourcing 2015: The Four Pillars of Sourcing Success report. Interested readers can download this exciting and informative annual research report by clicking here.
Every year, the pace of business continues to accelerate, forcing enterprise sourcing teams to adapt to changes and shifts within global markets in order to stay competitive. Although workloads and responsibilities continue to increase, sourcing teams remain understaffed with little relief in sight. As a result, collaboration, early engagement, process linkage, and automation have become valuable force multipliers to help extend a sourcing team’s impact throughout the enterprise, even as it remains stretched to its limits. This article series, based on the annual State of Strategic Sourcing report, will examine the pressures and challenges facing sourcing leaders today, as well as the capabilities and technologies that they bring to bear. It will conclude with a discussion of Best-in-Class performance, followed by recommended strategies that sourcing teams can employ to accelerate their souring game into 2016.
Spend Analysis
Spend analysis is one of the most valuable sourcing tools; yet just 37% of them currently deploy an automated solution. While this is not as low as other sourcing tools, like automated, digital contract authoring tools (16% adoption), nearly two thirds of procurement and sourcing teams today conduct spend analysis without an automated solution. This might help to explain why just 42% of respondents report having a standardized spend analysis capability, and why their ability to gain visibility into an array of sourcing metrics is mediocre at best and poor at worst. Chief Procurement Officers (CPOs) and sourcing teams that do not automate spend analysis are hard pressed to standardize and capitalize on this capability. Here’s what they can do for these organizations.
Modern spend analysis processes that feature an automated solution can aggregate disparate streams of current and historical spend data from across and outside of the organization, including supplier and third-party data, and pool it within a database where it can categorize, clean, and distill the data into actionable intelligence. Dashboards featuring analytics and data visualization tools provide users with the ability to interact with the data and understand it in new and informative ways. They also allow teams to generate automated and repeatable spend reports that provide sourcing teams and business leaders with insight on spending and category management behaviors and enterprise and supplier performance, which can ultimately help them make informed decisions.
The value of automating spend analysis processes can be greater than the sum of its parts, as well. For starters, an automated spend analysis solution can be linked to other strategic sourcing processes, like eSourcing, contract management, and supplier management to create a cascading effect from one to the other. Insights derived from conducting spend analysis can flow downstream into sourcing to a) enhance supplier selection and buying decisions, b) audit internal contract compliance to determine if buyers used existing contracts and supplier to source goods and services, and c) evaluate supplier performance to determine if suppliers adhered to their contractual agreements and delivered upon the value that was promised during the sourcing and negotiation phases. Moreover, standardizing each process – i.e., making the data formats, languages, process workflows, templates, and other features compatible with each other – can allow sourcing teams and business leaders to “connect the dots” among all four and enhance the efficiency, visibility, and value of strategic sourcing.
Final Thoughts
Adopting an automated spend analysis solution can provide CPOs and sourcing teams with the speed, agility, efficiency, and interoperability that is unmatched by manual, spreadsheet-based spend analysis processes. That just over a third of modern sourcing teams currently deploy an automated spend analysis solution sheds light on why standardization levels are not higher, and why so many sourcing teams struggle to gain visibility into fundamental enterprise and procurement performance metrics, like identified, booked, and realized savings, supplier risk, and contract compliance. Modern, automated spend analysis solutions can provide tremendous upside for sourcing and procurement teams looking to enhance their spend, category, supplier, and contract management, gain greater visibility into these processes, and ultimately deliver more value to the enterprise.
Spend analysis will be just one of many topics of discussion at Ardent Partners’ inaugural CPO Rising procurement executive summit, which will be held at the Harvard Club of Boston in March 2016. Preview and register for the event by clicking here!
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