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This three part blog will touch on the challenges that Corporations face when using procurement data to maximize their buying power and savings opportunities. 

The first part of this blog addresses current challenges and trends in data source and the need for taxonomies and concise classifications.  Taxonomy is a hierarchical representation of classifications.  When it comes to spend analysis there are several public and private taxonomies that are available to represent goods and services. 

In today’s economy, it isn’t enough for companies to know what they’re buying and from whom. To maximize savings opportunities and drive them down to the bottom line, buyers need current intelligence on supply market dynamics that they can leverage to make optimal sourcing decisions.

We see first-hand what differences data quality can make in a business, from better cost control in the short term and to better contracts in the long term.

In order for a company to use their procurement data effectively, their first step is to extract data from wherever it lives, second step is to classify it for easy analysis, and finally, enrich it with valuable market and business intelligence

Many customer’s spend data resides in disparate sources, which makes it difficult to extract and get an accurate company-wide view spend.  The data comes from many systems and data sources within a corporation, for example SAP Systems, Non- SAP Procurement and Financial Systems, Non-SAP Projects, P-Card and Corporate Card Vendors.  Data sources include Contracts, Purchase Orders, Invoices, Payment Transactions, Budgets, Travel and Expense, P-Card and Projects. Also, an international customer could have their data in several different languages.

Once the data is extracted, most spend data is often filled with inaccuracies, duplicate information and inconsistent categories, prohibiting companies from getting a true picture of spend.

One problem is when supplier’s identities are obscured due to poor data quality and lack of content which is prohibitive to having an accurate knowledge of your supply base.

Another problem is when spend categorization is incomplete or inconsistent; you lose the ability to have greater visibility to both direct and indirect spend in a consistent classification scheme. 

These problems make it very evident why the need for effective classification and use of taxonomies is important.

In the upcoming Part 2, I will discuss what taxonomies are and why they add value to our customers.

The Value and Importance of Taxonomies – Part II

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