Differing approaches to global spend analytics

4 November 2010

Dan Hawker

Dan Hawker

Former Head of Tobacco, Wholesale & Retail

In large organisations, it is imperative to understand what money is being spent with which business partners, and who your suppliers really are. Although that sounds simple, in reality it is not. Suppliers often have complex organisational structures that can hide how much spend is being placed with them. M&A activity means that subsidiaries often change hands. Spend is increasingly being placed globally, involving trading with partners in a wider range of countries. For large organisations, customers are often suppliers too. And the sources of spend data can be spread across many different types of platforms, with differing data standards.

To keep track of where spend is being allocated - and whether the best balance of cost and benefit is being achieved - large organisations need to have the best Global Spend Analytics to remain competitive.

But what is the right approach? It depends on where the organization is in its IT strategy.

Why have Global Spend Analytics?

The aims of Global Spend Analytics are to create visible cost savings, and to create more value from supplier relationships by:

  1. Identifying what spend is being placed with which supplier, globally - aggregating spend across borders with subsidiaries of large suppliers. Analysing the spend into categories, and understanding which internal stakeholders are buying from which suppliers. Bringing together all types of spend into one place - whether a PO exists or not.
  2. Understanding where the risks are in the supply chain - which suppliers are critical to the business? Which suppliers have an unacceptable level of risk associated with their delivery? What's the monetary value of the risk?
  3. Defining and driving through strategic change in the supply base - what size and shape of external spend does the business require from each area? How will the business make the change? What programmes are required to make the change, and how well are they performing?

What’s the right solution?

We’ve seen a number of answers with our customers. If a company has an existing SAP BW asset, it may choose to leverage that. Or it may choose to implement SAP Business Objects Spend Performance Management (SPM). Whichever tool is chosen, it must bring together all spend data from every part of the business, whether it be direct or indirect spend, whether it was properly requisitioned or not, and whether it comes from a packaged ERP solution such as SAP, or not.

It is relatively straightforward to enable non-SAP spend data to be uploaded and merged into core SAP spend data to complete the picture, using web technology that has been around for some time now. This is particularly important if there are some remote outposts in an organization that may have IT infrastructure issues.

With a single source of all spend data, companies can then deliver insightful analytics across the full range of requirements, including:

  • Executive dashboards, aimed at senior managers within the organisation who require an instantly understandable picture of all spend, with the capability to drill down into problem areas.
  • Flexible analytics, aimed at category managers and other business users that are tasked with delivering visible cost savings, and driving through greater value from supplier relationships.
  • Standard, repeatable reports that are issued automatically at periodic intervals, such as emailed reports on monthly spend, or more sophisticated automated monthly packs, aimed at leadership teams. 

Furthermore, with the right tool, users can drill through to operational systems to act on the insights straight away - either to investigate a transaction, or to start a sourcing or purchasing process.

The interesting question is how the information is then used. Some companies might choose to drive as much cost out of the supply base as possible. More enlightened companies will strike the right balance between cost savings and value creation. Some even manage to achieve both, through great supplier relations (John Henke of Oakland University gives a compelling presentation about how Toyota manages to drive top line growth through great supplier relations while still achieving cost savings).

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