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Articles in category: Spend Analysis & Benchmarking
Total cost of ownership (TCO) analysis was popularised by the Gartner Group in the late 1980s to assist clients in quantifying the financial impact of deploying IT products. A decade later, McKinsey applied the TCO approach to asset intensive industries in South Africa(Read Full Article)
Benchmarking – comparing your performance against others of equal size and in similar industries – is a favored practice for many business functions, including procurement. But CPOs take the practice one step further than most: They monitor average commodity prices as a marker for what prices their companies can be expected to pay in the market.
But what happens if you use the wrong benchmark?
IASTA, a leading global provider of strategic sourcing and spend-management solutions, has entered into a partnership with Bespoke Sourcing Solutions, a South African-based procurement and supply chain management advisory and knowledge development provider.(Read Full Article)
In case anyone had doubts, it’s now official that the "big data" revolution has gone mainstream: The US Postal Service is looking at big data and the analytical capabilities it promises to develop and implement its planned "Internet of Postal Things." If the Postal Service, which probably collects more data than most other organizations of any kind in the world, thinks analytics can help improve performance, there’s no excuse for the rest of us to think otherwise.
And, in fact, most CPOs share the Postal Service’s enthusiasm.(Read Full Article)
It’s time to get direct about indirect: businesses are leaving millions on the table. Indirect spend can represent up to 20-30% of revenues and you can expect to save 10-30% on spend through ’excellent’ procurement, but this requires the right mix of technology, people and processes.
In order to make the most of this opportunity, teams need to step up in these areas:
The focus with indirect procurement is often on procurement technology. Yet, there’s another, deeper level of specialized category tools that can provide an even stronger level of savings and quality service opportunities. Companies must ...(Read Full Article)
Procurement teams invest heavily in their core spend areas, but the final 20 per cent of spend, the “tail-end”, remains a largely untapped opportunity for most companies. A large number of suppliers, smaller spend volumes and a perceived lack of economies of scale mean knowing exactly where to focus attention on the tail is a daunting task.(Read Full Article)
If procurement professionals attempt to implement categorisation to optimise MRO operations in the same manner as other operations, they will in all likelihood obtain limited results. Due to the complexity of the MRO category this spend is often ignored or, if indeed tackled by procurement professionals, the spend ends up as fragmented categories with limited results.(Read Full Article)
Over on Purchasing Insight, your blog-master extraodinaire, Pete Loughlin, recently ran a two part series on Analyzing Direct Spend (Part I and Part II) from Michael Wydra of REL Consultancy. In his two-part series, Michael correctly notes that it is often the case that indirect spend areas provide higher improvement potential that is often easier to realise.(Read Full Article)
For some companies, an Oracle Unlimited License Agreement (ULA) is ideal. It allows them to pay a single fee up-front to get as many licenses as they need for certain Oracle products over a set period of time. Under the right circumstances, signing a multi-year ULA with Oracle may grant the business the flexibility they need to support growth. However, there are risks to consider. Not every client needs or will benefit from a ULA. In many cases, a ULA is a fast path to overspending.(Read Full Article)
We’ve seen many years of debate over the best way to organise procurement within complex organisations. And the question of whether it is better to centralise or decentralise, hold or devolve power, is still one of the most heated talking points among procurement executives. Now, technology has evolved to a level that means we may no longer need to choose between one or the other, or indeed try to make both models fit where an organisation has a siloed, category-led structure in place.(Read Full Article)
Technology purchasing is rarely a transparent process, especially when it comes to IT professional services. Despite the seemingly tidy packaging of hourly rates (as compared to, for example, complex licensing programs for software purchases), the risk of overspending is high. While much of this unplanned spending can be attributed to delayed project timelines and unforeseen circumstances, a large portion of it is caused by mistakes on the front end of the contract negotiation process.(Read Full Article)
The immense promise of big data to reveal new opportunities and deliver practical business results has so far been focused on technologies and models, and less on the human challenges of staffing roles and processes to take advantage of big data’s promise. The technology may be abundant, but developing, recruiting and hiring the people to use it is becoming an acute challenge for Fortune 1000 companies.(Read Full Article)
I’ve spent a good amount of time reading and rereading the KPMG paper, FUTUREBUY: The Future of Procurement – 25 in 25, an analysis of where the procurement marketplace is headed. Based on interviews with 25 procurement executives, the paper offers a look at the future of the function and the type of individuals that will thrive in it. One prediction in the paper is the rising role of procurement as “financial analyst” in the future. This is an observation with which I could not agree more.(Read Full Article)
In the not so distant past, a supply chain was simply the road from a farmer’s field to the market. Fast forward to 2014 and the picture has changed completely. Supply chains are now extremely complex global networks, strained by increasing consumer demands. The simple A to B path has been replaced with interdependent routes involving many suppliers, intermediaries and localities.(Read Full Article)
What’s your biggest IT concern in 2014? Security? Spending? BYOD? For many enterprises, the answer is “all of the above” thanks to stealth IT purchases and implementations across the organization. Shadow IT – the unsanctioned, decentralized technology spending that happens in business departments every day – will be a force to be reckoned with in 2014.Experts estimate that shadow IT spending in the average enterprise business amounts to as much as 20% of the entire IT budget. Thanks to BYOD and the cloud, it is easier than ever for employees and departments to run their application of choice on their ...(Read Full Article)
Finally, spend analytics tools and data management will break into the 21st century. Those who know who they spend with will finally understand what is spent and even when it will be spent again. After years of false dawns why might this finally happen in 2014? We have seen (finally) a surge in recognition data has to be the starting point of any good procurement exercise and investments are being made accordingly.(Read Full Article)
More than eight out of 10 firms say category management is a top priority for procurement, a survey has revealed. Future Purchasing’s Category Management Study found 85 per cent of companies thought category management was a top-three priority.
However, just 2 per cent rated their use of category management as excellent, with a quarter of respondents describing themselves as “leaders” and the rest as “followers”.
The study revealed that a fifth of followers, defined as those who described the level of category management in their organisation as basic or improving, had no measure of savings. This compared with leaders ...(Read Full Article)
Firms are 'flying blind' on global supplier data. Research by The Hackett Group covering more than 100 companies found less than 30 per cent have “near real-time visibility” of supplier base spend volumes, and less than half have the same level of visibility into customer information and business volumes. Only around a quarter had similar access to financial performance and forecasts.
Conversely, “globalisation leaders” had access to this information almost 80 per cent of the time on average, with automation “one key strategy” to achieve this.(Read Full Article)
E-procurement software provider SciQuest has bought competitor CombineNet in a $43 million (£27.5 million) deal. SciQuest said it acquired CombineNet because the company’s software represents “the best solution in the advanced sourcing arena”. Both firms provide cloud-based business automation systems for spend management, but CombineNet’s proprietary technology “optimises and evaluates complicated vendor bids and proposals” and allows scenarios to be run balancing facts including cost, risk, timing and value. It is primarily designed for Forbes Global 2000 companies. SciQuest said the deal would give the firm a tool that improves decisions for spend categories “that are typically ...(Read Full Article)
The news that OB10 is to go public broke last night – actually a little prematurely – but now it’s official and Tungsten and OB10 have announced their intentions. Pete Loughlin spent 20 minutes on the phone with a delighted Luke McKeever, OB10′s CEO, to understand the details of the deal that values OB10 at £99 million.
IT outsourcing isn’t what it used to be – at least that’s the message the industry is projecting as we enter the second half of 2013. Many industry experts have preached about “the death of IT outsourcing” as the cloud transformed the IT ecosystem and enterprise capabilities and CIOs became fed up with poor results and projects that run well over budget. But while these issues have made many IT and sourcing executives think twice about outsourcing, the reality is that IT outsourcing (ITO) isn’t going away. The pressure to deliver complex projects in tight timeframes still lends ...(Read Full Article)
That “Global IT spending is growing, albeit cautiously” was the message shared by Gartner in their IT Spending Forecast, 2Q13 Update. While the analyst firm previously predicted a 4.1 percent growth in IT spending this year, they have lowered expectations to 2 percent for a total of $3.7 trillion. The caution can be chalked up to instability in U.S. dollar exchange rates and declining PC sales, which isn’t exactly surprising. Between fiscal policy debates and global economic instability, not to mention the death of the desktop, the impact on IT spending is evolving in real time ...(Read Full Article)
Finding and extracting value from sourcing activities is becoming ever more challenging. Suppliers know all too well that buyers will try and negotiate the best deal and sourcing teams are under more pressure than ever before to extract savings and efficiencies from the supply chain. A tried and tested method of extracting value from sourcing initiatives is a structured Sourcing Opportunity Analysis. This process, adopted by Bespoke, has realized meaningful savings and supply chain efficiencies on the sourcing projects we have worked on.(Read Full Article)
Unlike many organizations that use spend analysis as a tool to drive supplier rationalization, FMC Technologies is not looking to reduce its supply base. Rather, their focus on building visibility into spending and supplier performance centers on standardizing and deepening relationships with their strategic suppliers worldwide. Some of the data points they leverage in this hybrid spend and performance analysis include quality, on-time delivery, open purchase orders (POs), forecasts and supplier risk information.(Read Full Article)