There may be no greater advantage for the modern enterprise than visibility. Today’s procurement organizations are often under pressure to not only drive down costs while improving category management, but to also enhance their array of source-to-pay processes in support of larger enterprise objectives. While collaboration, automation, and other core strategies advance procurement’s overall value and influence, it is within the realm of intelligence that Chief Procurement Officers (CPOs) and their teams may find the greatest organizational impact. In fact, the next great path to procurement performance improvement will be blazed with the next generation of spend analytics and data-driven strategies.
For the last eight years, CPOs and procurement teams have been most pressured to identify and realize savings for the enterprise – a trend that has been steadily declining but still takes the top spot for a majority of CPOs. Fortunately, many CPOs and procurement teams already have a handy tool in their toolbox that helps many enterprises identify and realize greater savings, and that is spend analysis. Although not universally applied, automated spend analytics tools help many Best-in-Class CPOs and procurement teams examine historical spend by by supplier, category, region, etc. By taking advantage of reams of Big Data, users can aggregate, cleanse, categorize, and distill spend data down into actionable spend intelligence. This spend intelligence then provides greater visibility into sourcing behaviors and allows CPOs and procurement practitioners to change those behaviors – whether that means sourcing more categories from one supplier, driving greater internal contract compliance, or using spend intelligence to support supplier performance management initiatives.
In linear terms, here are the benefits of using an automated spend analytics solution, next-gen or otherwise:
- Spend Visibility: Automated spend analytics yields spend intelligence, which provides spend visibility – a foundational building block for enterprise performance enhancements. Gaining spend visibility allows for a host of other improvements for numerous stakeholders. Like…
- Identification of savings opportunities: CPOs and procurement teams that employ automated spend analytics are nearly twice as likely as those that don’t to have the ability to identify savings opportunities within their supplier arrangements. Although spend analytics solutions do not guarantee enhanced enterprise performance, they do increase the likelihood of success.
- Building a “smarter” procurement team: Automated spend analytics tools also help educate CPOs and procurement practitioners and help them make more informed and wiser sourcing and buying decisions. Users can review historical spend information, apply it to current market conditions and enterprise needs, and determine what the best course of action all things considered.
- The ability to improve supplier management: Lastly, automated spend analytics tools can help overwhelmed CPOs and procurement teams aggregate their supplier base according to category, spend, volume, strategic importance, and other factors, and help them consolidate their supplier base for enhanced supplier management. From there, CPOs and procurement teams can better decide where to place more of their spend and where to offload less strategic, less valuable suppliers.
These insights (and more) are highlights from one of Ardent Partners’ research reports, Next-Gen Spend: Accelerating Procurement Performance with Data-Driven Strategies. The report is sponsored by GEP and interested readers can download it here (registration required).
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