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Articles in category: Spend Analysis & Benchmarking
In the 1990s and 2000s, companies went to China out of fear of being left behind, not necessarily because they had made an informed decision based on data about the Total Cost of Ownership (TCO). Now it seems they are coming back for fear of being left behind again.(Read Full Article)
Enforcing strict expense management policies is essential for companies looking to save on expenses but runs the risk of making employees feel disenfranchised and micromanaged. Companies that use technology to monitor staff spend can achieve better expense management without damaging employees’ trust. Matt Goss, managing director – Australia & New Zealand, Concur, said, “Businesses need to keep a close eye on expense-related issues such as taxes, labour regulations and return on investment.(Read Full Article)
In mid May, IQNavigator, the Denver-based provider of non-employee Vendor Management Systems (VMS), announced that it has updated its offering, which will now feature configurable dashboards and automated workflows for on-boarding and off-boarding contingent workers.(Read Full Article)
Spend visibility is foundational to any procurement transformation because to better manage supply, you have to manage spend. Spend is what you pay and supply is what you get, and to manage spend you have to see it. Yet too many procurement organizations work hard to put basic spend analytics in place but don’t have a broader vision, strategy and roadmap for strategic supply analytics (i.e., the analytic capabilities to support strategic supply management).(Read Full Article)
Business executives are often faced with a variety of challenges in their daily roles, including growing revenues, improving internal operations, and driving intelligence into the inner-workings of their enterprises. On the spend management side of the average company, specific areas sometimes warrant more focus and rigor than others…particularly when budgets are top-of-mind. For example, the [...](Read Full Article)
More and more business decisions are being made based on data analytics, but is this killing off a buyers nose for a good deal?
Data is in vogue. It is being used everywhere and for everything. In sport every single thing an athlete does from their heart rate to their passing and shooting accuracy is measured and analysed while in business, and procurement in particular, the performance of staff, products and suppliers are all monitored and scrutinised to the nth degree.
Most companies Enterprise resource planning (ERP) systems do not have the capability to track procurement savings. Those companies, who do attempt to track savings, mostly use Excel spreadsheets to report savings. Besides being a manual and time-consuming process, there is often no standard method for this calculation.(Read Full Article)
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?
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)