Spend Analysis: Driving Spend Management Excellence with the Numbers on Your Side
“To control 800 horse power relying just on arm muscles and foot sensitivity can turn out to be a dangerous exercise” words from the legend of Formula 1 racing – Michael Schumacher. A passing glance in to the pit lane of any Formula 1 racing team would suffice to get the reference of his statement. Away from the high speed lanes and grabbing an occasional camera glance are engineers seated in each pit lane providing real-time racing inputs to the drivers as data arrives in break-neck speed from the cars. In the 2012 Brazilian Grand Prix, the crew of the Red Bull racing team pulled an amazing feat by providing corrective measures for Sebastian Vettel’s car using data gathered from his car just moments after his collision earlier on in the race.
In a sport where split second calls can decide a podium finish, it definitely helps to have the numbers on your side. Closer home, in the world of sourcing and procurement too, an increasing number of organizations are realizing that making trusted and confident supply chain decisions requires analytics that’s more than pencil, paper and Excel spreadsheets.
A study conducted by SAP revealed that a staggering 86% of the firms believe that spend visibility is important. Yet, as per same survey only 40% of the companies have good visibility on their spending and suppliers. This conundrum underlines the point that spend analysis is more than just data aggregation and visualization. Creating sustainable value from spend analysis calls for accurate classification of data, enriching supplier information, blending market data and benchmarks. In addition, improving user adoption for spend visibility in the long run requires blazingly fast analytical platforms that handle large volumes of data without compromising on speed.
The benefits from such efforts too are manifold. It extends beyond the quick hit sourcing savings opportunities to working capital optimization, risk mitigation planning, corporate social responsibility and the likes.
- A financial services firm extended its average Days Payable Outstanding (DPO) after discovering that it maintained multiple payment terms with the same supplier across its subsidiaries, thus resulting in working capital savings of USD 2.5 million
- While aggregating data from over 100 source systems, a manufacturing firm identified opportunities to optimize its supplier base by 20% by discovering supplier overlaps and linkages
- A media and entertainment company achieved sourcing savings benefits from a single category that far exceeded its investment in spend visibility for a period of three years.
These are just some of the many real world examples that demonstrate how spend visibility stands to deliver tangible value. Like the quote goes “Then there is the man who drowned while crossing a stream that was, on average, 6 inches deep”, good spend visibility is the stepping stone for spend management excellence and not an end in itself. Insights delivered from spend visibility is put to best use through disciplined execution in an ecosystem of collaborative processes comprising strategic sourcing, supplier management, procurement and business networks.
The Lines-of-Business Campus at the 2014 SAPPHIRE NOW discusses many such strategies on creating a holistic approach for spend visibility. Add our session, “Let Your Numbers Do the Talking for Superior Spend Analysis,” to your SAPPHIRE Now agenda and learn more on how good spend visibility drives good spend management.