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Articles in category: Spend Analysis & Benchmarking
When we as procurement people look internally and attempt to analyse the performance and effectiveness of our own function – ‘spend under management’ is normally the metric we turn to and I’m not convinced this is a smart move.
I’m not going to argue that a procurement team that actively manages a large part of its spend is not positioning itself for success, that logic is sound. But, I do feel the spend under management metric (in its current interpretation) is a little misleading.(Read Full Article)
The world of complex spend management can often frustrate the typical procurement executive, as each category that encompasses this area has its own distinct set of capabilities, competencies, solutions, and yes, even performance metrics.
Events management is an arena that has evolved tremendously over the past few years, with organizations treating corporate events (in all of its forms, such an incentive, customer / client, revenue-generating, etc.) more as “engagements” than one-shot live meetings(Read Full Article)
UK-based Future Purchasing is a specialist procurement consultancy. This month they published the results of their 2014 global survey in Category Management, which shows that there are massive improvements still to be made in this area.(Read Full Article)
The issue of realising a return on investment from services spend is one of the biggest challenges for procurement. What, then, can we learn from those who have made inroads here?
Measuring the value of in-tangible services can be difficult, especially with, say, marketing services such as advertising in which you can often have very little to go on to derive the success achieved as a result of the campaign.
However, what is essential to start accomplishing control over this spend is firstly to gain transparency over how much your company is spending on professional services(Read Full Article)
Around these parts, the phrase “complex spend management” is tossed around frequently when discussing how the modern Chief Procurement Officer should develop their global programs and strategies. Today’s CPO Rising article is an overview of why the “hottest” complex spend categories (which have been historically linked to indirect spend management) must be critical focal areas [...](Read Full Article)
The modern procurement executive and Chief Procurement Officer often lists “improve visibility” on their corporate to-do list nearly everyday. For some organizations, this goal is often a pipe dream or something they “feel” they should be doing in the greater scheme of supply management. However, top-tier CPOs realize that improving visibility isn’t a simple goal on a list crowded with other objectives: it’s a formidable, real target that must be achieved in order for procurement to drive true value across the greater enterprise.(Read Full Article)
The Procurement Leaders Zurich 2014 Forum panel discusses the role and benefit of using big data within procurement.
Big data has many definitions, ranging from “unstructured” to “a lot of data” but the panel discussion on this very subject at the Procurement Leaders Zurich Forum defined it as “the moment when you have so many data points and systems that you cannot put it into one single system anymore”. So far, most of big data analytics has been seen on the sales side although we are increasingly seeing procurement applying it within their own function.
Here are some trends on ...
Gaining cost transparency is a critical aspect of any negotiation or category planning exercise. It is understanding which cost drivers can be influenced by procurement that informs us which lever should be applied and whether or not the objective is cost reduction.
Achieving cost transparency for physical products can be achieved by teardowns aimed at identifying the type and quantity of raw materials and components – often a lengthy process, but a reliable route to better understanding the underlying drivers of cost.(Read Full Article)
When it comes to spend analysis there is at least one particularly powerful tool out there that will meet the majority of the needs of any organization and probably at least one tool that will do, with elbow grease, just about any analysis an analyst can think of. Since businesses have wanted reports and analytics since the days of the first spreadsheets, analysis tools are always advancing and most are beyond the ability of the average user to fully utilize their functionality.
Despite the plethora of options available, today there is only ONE thing I would do to improve spend ...(Read Full Article)
If you are procurement professional and your workstation is buried under altogether too many papers for your review, approval, storage and forwarding, it’s time to take an ‘electronic’ leap.
Get rid of the paper-based, costly, inefficient, time-wasting, worryingly complex, easily forgettable and can-be-missed procurement details and papers. Your smartphone, iPad or computer should take charge of the timelines, costs, approval needs, signatures, storage and forwarding of documents.
Just ask yourself the following questions:
- Are purchase requests, RFQs, quotations, comparisons, orders, delivery receipts, completion certificates and invoices still being printed and couriered as hard copies?
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)