E-Sourcing Forum » Spend Intelligence Found

Spend Intelligence Found

January 9th, 2007 at 04:17am David Bush - Iasta

I am still amazed by the very high quality publication coming out of the UK, European Leaders in Procurement. Custom images, thick glossy stock, and quality content make this relatively new mag quite enjoyable to read. Last month, an article by Matthew Harrowing, was written about the challenges of procurement and sourcing systems that exist without the benefit of spend intelligence.

This is an excellent write up that gives background on where problems generate and ways that spend intelligence can address them. An example discussed in the article describes how a company negotiated 5% savings but closer analysis determined that the average invoice was less than $500, payments weren’t being consolidated and 14% of transactions were reversed, resulting in a process cost of about $120 per transaction, wiping out all the savings. The diagnosis of this problem is effectively addressed through good spend visibility.

As the author explains, the future of spend intelligence lies in dealing with historic data and system issues by enriching source data and providing flexible on-demand reporting for all aspects of P2P. The data must not only show how much was spent but where it is impacting the organization and clearly help frame issues that can be resolved easily once identified. I would also add that this data must be easy to view and report in different dimensions. Data is not static, even if it is not live, and users should have the flexibility to make flexible analysis and data combinations.

All said, a very nice overview and worth reading.

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Entry Filed under: General, Spend Analysis, Supply Management Best Practices, Technology

3 Comments Add your own

1. David Rotor | January 10th, 2007 at 12:35 pm

David,

I have a slightly different view on thefuture of expenditure analysis. That said, I understand and value the historic approach, as I wrote today on my blog:

“I agree in the value of expenditure analysis, in 2006 I led a team that needed to understand $20 billion in purchasing across over 100 organizations. It will come as no surprise to anyone in procurement that among the very first thing we did was start grabbing data to build an expenditure database, and then started mining that database to understand both micro and macro purchasing behaviours.”

I don’t want expenditure analysis to tell me that my process cost $120/transaction and wiped out all the savings. I want expenditure analysis to tell me it’s happening, before my savings are wiped out.

Cheers,

David Rotor
2. David Bush - Iasta | January 10th, 2007 at 2:00 pm

David,

Thank you for your comments and insightful post. I just found your blog this week and have been regularly popping in to review. We recently wrote on micro-map vs macro-map that you may find interesting:

http://www.esourcingforum.com/?p=309

I look forward to more collaboration and discussion. db
3. David Rotor | January 10th, 2007 at 3:15 pm

Thanks for the link to the post on micro and macro analysis. It was also interesting to see the hat tip to Bernie Gunther and Tariq Hassan’s new “The Buying Triangle”. I had a team take a hard look at their approach and the response was very favourable.

I’m just a procurement practitioner and look to guys like you and Tim Minahan for insight and research, but I’ll comment when I think I can contribute.

Cheers,

David Rotor

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