Powerful reporting and analytical capabilities should be a component of any supply management solution and a requirement for any procurement team seeking to optimize the value of their technology investments. While technology nirvana would be the automation of the entire source-to-settle process, including comprehensive reporting capabilities, many organizations pursue an incremental approach due to budget and resource considerations. Accordingly, an examination of the reporting/analytics capabilities of each application area is warranted.
Running the Gamut
To start, automated spend analysis tools aggregate supplier spend data drawn from ERP/MRP systems, AP/Finance, commercial cards, eProcurement, and other transactional systems. They categorize, cleanse, and enrich the data and facilitate robust reporting and analysis. Users can create regular, automated reports, plus ad-hoc reports that visualize spend and sourcing data, historical, and projected spend. They can also compare realized and negotiated savings, provide category, regional, and supplier spend breakdowns, what-if scenario analyses, and other views of the data.
Spend intelligence can be used to inform future sourcing decisions, particularly when pulled into an automated or electronic sourcing (eSourcing) tool and placed against active sourcing opportunities and supplier bids. Users can compare suppliers, categories, and bids to determine what the best price, value, terms, and least risk are to the organization. eSourcing tools capture supplier bid information and help teams analyze and award business via powerful analytical and reporting capabilities. Optimization-based sourcing tools take supplier bid analytics to the next level by processing extraordinary volumes of data, performing scenario analysis, and many other uses in the context of identifying the highest-value suppliers.
Post-contract negotiation and execution, digital contract repositories provide for a central, searchable, and secure location for all contracts and contract documents, which can increase visibility for all parties with a “need to know.” Buyers can search repositories for existing contracts with trusted suppliers, rather than engage in off-contract (“maverick”) spend and erode the value of a negotiated supplier agreement. They can also consult contract terms and conditions (“T&Cs”) and service-level agreements (“SLAs”) and avoid last-minute supplier attempts to renegotiate the contract or up-sell the enterprise for goods and services already included in the contract. The visibility gained from deploying a digital contract repository can help to prevent savings leakage, defined as the difference between the savings identified at the time of contract award and the savings realized after the delivery of goods and services.
Supplier information management (“SIM”) tools provide a single system of record for supplier information that resides across the enterprise. They combine supplier data from AP/Finance, General Counsel/Legal, Marketing, Operations, Procurement, and third parties to ensure that all stakeholders reference the same data that and that it is also current. They also help to ensure continuity when enterprise or supplier personnel leave their employment and the B2B relationship needs to continue. Likewise, supplier performance management (“SPM”) tools provide procurement and sourcing teams with the means to gain visibility into their suppliers’ performance, which, in a fast-paced and turbulent commodities market, can result in risk avoidance/management and or increased savings. SPM tools, like supplier scorecards and surveys, provide for a fair and measurable method to track and rate their suppliers’ performance to ensure that procurement teams are working with the best suppliers in the market. They can catch issues and under-performing suppliers before they reach critical levels, incentivize those suppliers to improve their performance, or illuminate low/non-performing suppliers for termination.
eProcurement tools provide users with visibility into existing suppliers and available categories and supply. These tools provide the direct means to purchase goods and services from preferred suppliers and frequently links purchasing with payment. Buyers can leverage existing supplier relationships and buy against contracts using web-based catalogs and ordering tools to capture the value that the sourcing team negotiated with suppliers. Visibility, process linkage, compliance, and savings are among the benefits of an eProcurement tool.
Final Thoughts
By linking data analytics directly to different procurement processes, enterprises can ensure that important decisions are made using the best available information. For example, the sourcing teams that utilize fully-automated spend analysis solutions identify more than double the amount of savings on their average sourcing projects than those performing spend analysis in a fully-manual way. The savings benefits of utilizing the automated solutions discussed above extend across procurement operations. By placing procurement’s Big Data into a usable format and enriching it with pertinent and complementary internal and external information, a supply management dashboard/system can become the hub of procurement operations.
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