At Sievo, we’re passionate about the insights gained from spend analytics. Through our collaboration with Scanmarket, we’re bringing our shared customers more value through strategic sourcing.
“The general who wins the battle makes many calculations in his temple before the battle is fought. The general who loses makes but few calculations beforehand.” ~ Sun Tzu
When talking about technology, it’s worth keeping in mind these words by the famous military strategist and philosopher. Sun Tzu knew over 2500 years ago that data and preparation were the source of winning strategies. How could we apply some of his methods to procurement today?
To dispel myths and help form a winning strategy, here are five things spend data can and can’t solve in strategic sourcing.
5 Things Spend Data Can Solve in Strategic Sourcing:
- More Data-Informed Decision Making - One of the core benefits of spend analytics is that you can inform sourcing decisions based on realized data all the way down to a transaction or line-item level. With reliable analytics you can identify under-performing suppliers, risk positions or identify vendors to include in an RFX or auction.
- Establish Trust with Stakeholders Through Fact-Based Reporting - Every procurement team needs solid reporting to prove their contribution to finance. When spend reporting is done in excel or one-off spend cubes, you’re exposed to human error or misjudgments. Finance won’t back your sourcing strategy if it won’t trust your numbers.
- Timely New Opportunity Identification - A decade ago, data analysis was so time-consuming that many companies only reviewed spend on a yearly or quarterly basis. To stay competitive today procurement organizations need to be more agile and require faster time-to-insights. Your sourcing strategy can’t be based on just last year’s data, you need to act closer to real-time.
- Benchmark Performance vs. Peers or Markets - One way in which strategic sourcing will radically change over the next decade is through Big Data enabled procurement benchmarking. With access to detailed peer or market spend data, procurement organizations can maintain competitiveness in dynamically changing competitive landscapes
- Prioritize and Prove Impact - Reliable spend data helps you prioritize impact on a high-level and in the long tail. Effective sourcing strategies can be built around improving core metrics like spend under management, contract coverage or payment terms. Spend data gives you rules of the game, strategic sourcing helps you achieve winning results.
5 Things Spend Data Can’t Solve:
- You Can’t Automate Trusted Partnerships - Spend data can give you detailed insights on suppliers from payment terms to delivery performance. You can even automatically enrich supplier spend data with risk or sustainability ratings. What spend data can’t do is automate the trusting partnerships you form with key suppliers
- You Can’t Replicate Category Expertise - At Sievo, we’re getting very good at developing machine learning spend classification to accurately categorize different types of procurement spend. While machines can improve classification accuracy and efficiency, we still rely on category experts to train machines and validate industry-specific results.
- Spend Data Can’t Handle Creative Negotiations - Spend data can help you identify opportunities to improve your supply base, but it can’t help you manage complex negotiations. You may be able to identify true market prices, but you’ll still need strategic and sometimes creative negotiations to reach desired results.
- Data Can’t Interpret Executive Demands - Sourcing strategy is often about more than cutting costs. You can analyze spend data around goals like supplier diversification or risk mitigation, but you’ll still need to go the extra mile to turn your executive priorities into strategic actions.
- You Can’t Call Data When Things Go Wrong - Spend data can be great for identifying market anomalies and unexpected supplier performance, but it can’t help you react to unexpected disruptions. When adverse weather conditions or tariffs suddenly threaten your supply chain, you’ll still need procurement leaders to re-align sourcing strategy.