Spend Matters Compass Research: Series Two

In the past decade, procurement and finance executives have become generally aware of the potential impact of supplier insolvencies, supply disruptions, commodity pricing volatility and the impact that these -- not to mention a range of other dangers lurking within their supply chain (e.g., supplier CSR violations or non-compliance) -- can have on their business. Yet few organizations have begun to make a dedicated effort to target supply risk at the executive level in a concentrated way by building comprehensive supply risk intelligence into their supplier management and supply chain planning efforts. Even fewer that have started down this path have put analytics at the front and center of their strategy to model and predict risk within their comprehensive supply chain.
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Without question, the benefits that the initial generation of spend analysis solutions brought to market were significant, helping companies identify hundreds of millions of dollars – if not more – in collective savings opportunities. Still, a variety of business and technical limitations constrained these initial approaches. From a technical perspective, first generation-spend analysis approaches had to make due with the underlying architecture, development, analytical and visualization capabilities available to us at the time.
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Spend Matters research suggests that the most powerful approach in defining an ideal future transactional buying and P2P state comes not from what we've expected to achieve in the past, but what we can challenge ourselves to quantify, benchmark, define and measure in the future. Put another way, rather than simply implement P2P (e.g., eProcurement, EIPP, T&E, etc.) systems and related analytical tools to pursue and measure the previously bulleted activities, organizations should first understand both what's possible from a quantitative improvement standpoint and where they are today.This Spend Matters analysis provides both tactical direction for understanding P2P savings and working capital management strategies both broadly and on a category basis as well as expert benchmarks to help companies get more from their efforts.
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The history of advanced procurement analytics goes back less than two decades. Yet within this time frame, we've observed significant market adoption of a range of technologies. To summarize this evolution, procurement analytics started by extending IT-centric data management strategies before quickly moving into a specialized set of dedicated spend analysis toolsets. As this journey unfolded, greater numbers of end users began to interact indirectly with spend analysis tools through reporting capabilities while power users increasingly began to drill down on more complicated datasets. Still challenges, remained.

Fortunately, overcoming at least a subset of these limitations today can be as easy as choosing specialized providers. Yet the biggest limiting factor for how companies use procurement analytics is often not underlying software limitations—or knowing who to turn to. Rather, it's using their imaginations to conceive what's possible through procurement analytics and then working backwards to make what might appear a long-term vision into a shorter-term reality. This Spend Matters Compass paper presents three experiential scenarios that we hope will provide companies with distinct visions for what advanced procurement analytics can enable using off-the-shelf capabilities today.

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