Spend Matters Perspectives

Thomas Kase, Lead Analyst, Spend Matters

Like most large firms that have grown by acquisition – and hardly any haven't – the supplier data floating around inside the organization reminds me of Samuel Johnson's quip about lies and the infernal side of statistics in that there is old data, missing data, or simply too much data. How would you answer these vendor related questions?

• Are your records current, do you have all the important facts, have you managed to sift through the numerous redundant data points that are continuously being collected?
• Are you paying the right vendor, only once per PO, using the right payment terms – without running afoul of internal compliance, IRS or other regulations?

Clear as these data challenges are, building a solid ROI business case can be challenging – the company in the Accurate Supplier Data Creates Savings for Pharmaceutical Shared Service case study found that even though their supplier data issues were numerous, what clinched the deal was focusing their efforts on credit recovery – with a contingency-based component as added solution provider incentive. A tangible and measurable effort that won the finance department over.

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By Jason Busch, Executive Editor, Spend Matters

In Samuel Beckett's Waiting for Godot, two chaps philosophize, debate and engage in quite a lot of self-pitying while aimlessly waiting around for a figure they call Godot (who never in fact arrives). The entire play, depending on one's perspective, is an exercise in either rhetoric or existential thinking. But regardless of your vantage point, it's pretty clear that the protagonists accomplish just about nothing by the end. Inaction – and the status quo – end up ruling the day.

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Thomas Kase, Lead Analyst, Spend Matters

The past decade has seen significant reinvention of existing procurement tools focused on decision support and information management. Historically, many companies have relied on manual approaches to sourcing, contract management and supplier management (e.g., fax, email, office) or the installed software capabilities of ERP extensions or other third-party solutions, many with limited capabilities.

Over the past decade, a period of punctuated equilibria within procurement technology, cloud models have come to dominate a range of solution areas. Cloud capabilities typically result in quick implementations with limited or no IT involvement. Rapidly deployable in a cloud environment or behind a firewall, the approach has empowered the procurement community in a range of ways including ease-of-use and general front-line business user accessibility; permitting experienced sourcing experts as well as more traditional "buyers" to walk up to a tool set and be productive with little or no training. As a result, procurement teams can get up and running quickly with the solution to start generating savings.

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Jason Busch, Executive Editor, Spend Matters and contributor Beeline
Benchmarks and KPIs have become an integral part of successful contingent workforce management initiatives and now, SOW programs. As procurement organizations become more sophisticated in managing services spend, many are quickly learning about the benefits of looking at overall quality and the total cost of ownership of a given relationship on top of the hourly costs of individual contingent workers. This move has come as leading-edge companies are pushing to answer "why" as much as "what" or "how much" when it comes to both vendor (e.g., rate compliance, response time, etc.) and internal performance. Moreover, effectively managing procurement-led KPIs and benchmarking is becoming a stepping-stone to incorporate organizational inputs from HR, finance and other areas of the business.

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Co-authored by: Jason Busch, Thomas Kase, and the Fieldglass team
Spend Matters and Fieldglass have observed a significant ramping up of many contingent workforce and services procurement programs within Global 2000 organizations over the past few years. For companies serious about general procurement programs and enablement through technology, the additional investment in a VMS (vendor management system) to tackle contingent spending is a logical extension to core capabilities in the indirect purchase-to-pay arena. It also enables additional spend analysis, e-sourcing, contract management and supplier management capabilities.

Yet few organizations making a concerted effort to pursue contingent spending have made a similar investment in their statement of work (SOW) initiatives, at least to date. This is unfortunate, as the capabilities enabling SOW control, compliance, and negotiated and implemented savings often differ from VMS automation platforms that only support contingent labor spend today.

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Purchasing consortiums are rapidly establishing themselves as a vital link in today's world-class supply chain strategies, used as a powerful tool to significantly drive down costs by supply chain managers in the most effectively run procurement organizations in corporate America. To find out why, Spend Matters, in conjunction with Allianza Partners, has researched the top 10 consortiums in the US. Though the common belief is that smaller businesses benefit most from consortiums, our research shows that very few people are aware of a powerful fact: 15-20% of the Fortune 1000 currently use buying consortiums! And 85% of the time, they're seeing 10%+ of real savings!

Download this Spend Matters Perspective today to find out why.

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If you need accurate vendor data to deliver value to your organization -- regardless of what data point that is -- then this Spend Matters Perspective is for you.

Today, many finance, operations and procurement organizations have directed sourcing and supply chain activities toward finding the right product at the right price delivered at the right time -- while overlooking the impact of less tangible vendor issues, or even merely assuming that these will be dealt with by someone else in the organization. Undoubtedly, spend analysis and aggregation of vendors across business units, managing parent-child links, etc., is important. But such activities only solve a small fraction of the overall data quality mess.

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At Spend Matters, we track many aspects of the procurement and operations world. And in most of the areas we analyze, it’s possible to see an evolutionary approach to the market adoption of new types of products and services. But procurement staff augmentation services are different. In what feels like a compressed period of time, procurement staff augmentation has exploded into an entirely new market niche that was barely on the radar screen before its ascent. And since the publication of this original paper in 2008, the increase in adoption of staff augmentation services within procurement groups has continued to boom.

In reviewing this original paper from 2008, much of what we said at the time – which is largely intact in the text, albeit with a number of additions – has proved accurate and we hope helpful as companies explore staff augmentation options. As we looked to update this material for 2011, what has changed the most in our observation is the introduction of a more mature marketplace of both decision makers and providers.

What do staff augmentation services look like and what are some of the benefits (and pitfalls) to be aware of?

In this updated version, we also consider, among other new additions:

• Overall updated observations (e.g., rate increases since 2008)
• The rise of domain/category specific skills (e.g. the category skill-sets that are in demand and whether companies really need highly specific contingent sourcing expertise -- or not)
• Decision criteria and sustainability of programs (e.g., who is the decision maker and who has budget authority for procurement staff augmentation)

If you're looking for a primer on the benefits of procurement staff augmentation services, this Spend Matters Perspective compresses a significant amount of information on the subject into a succinct analysis.

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Over time – sometimes over very short periods – technology markets trend toward a combination of consolidation, sameness and then, eventual and sometimes radical evolution. Consider how Cisco went from purchasing the hot new low-cost consumer camcorder company, Flip, to closing down the business unit that acquired it, all within a span of less than five years. Yet enterprise software and BI is often far more staid – with life spans measured in human rather than dog years (or even insect years). However, a radical evolution is afoot in spend analysis at the moment. It's not just the advent of next generation platforms, nor is it about technology for technology's sake; rather, it's a new understanding of what the right set of tools can enable business users and analysts to accomplish.

The Perspective ends by suggesting nine actionable items that companies can put to use to take advantage of the latest that spend analysis approaches can offer. Whether you're new to spend analysis or are looking to hit the hyperdrive switch to vastly accelerate the benefits of existing programs, this analysis will prove invaluable.

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This Spend Matters and MetalMiner Perspective provides a first person account of how legacy e-sourcing approaches (and reverse auctions in particular) can come up short when it comes to navigating the waters of more complex categories and larger sourcing events. Written in first person and in a straightforward manner, the informality of the white paper masks the complicated nature of the arguments and instructive lessons it makes. Included are examples of specifically how optimization and advanced sourcing can change the strategic sourcing process as well as lessons learned from the advent of new approaches to creating markets and events using the latest in data gathering and analysis techniques. The Perspective also includes a case study in the market for sourcing tin cans.

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SAP SRM 7.0 is most certainly the most anticipated procurement application that any ERP provider has released in a long time. But how does SRM 7.0 actually compare with earlier versions let alone the competition? And what are the costs, options and trade-offs for different deployment models? This Spend Matters Perspective provides background, context and analysis to help companies better understand all of the options available to them with SAP SRM 7.0 and to make the best possible decision based on their requirements.
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ERP procurement applications have come a long way in recent years. But nearly all still leave tremendous opportunity on the table when it comes to opportunities that advanced downstream payables and invoice automation can enable. This Spend Matters Perspective examines how companies can leverage their existing or planned ERP procurement investments by taking advantage of new savings and working capital management solutions that unite the objectives of procurement and finance organizations.
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As we enter 2009, commodity price volatility is on everyone’s mind. At a rate in some cases at nearly fifty times the pace at which many markets rose in recent years, nearly all commodities came crashing back to earth in a matter of weeks in recent months. But how can companies best take advantage of riding the markets down while reducing exposure and risk in rising markets? This Spend Matters Perspective examines how global pricing indexes can become a critical tool in every direct materials sourcing arsenal.
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Everyone from executives to analysts will admit that there's a large skills gap in procurement and operations organizations today. But in a challenging economic environment, what's the best way to address it? Few organizations can afford to add new resources. The answer: training, certification and distance learning options that associations, universities and consultancies can provide. This Spend Matters Perspective analyzes and evaluates many of the available options, including ISM's new CPSM certification.
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The word sustainability all too often conjures up sourcing and supply chain tactics that add cost and complexity. But this does not have to be the case. Industry leaders have begun to reduce costs by embracing sustainable approaches to sourcing and supply chain management. They've also expanded the definition of sustainability to include practices and processes that help reduce supply risk. Learn how sustainability can help your organization to save money, improve supplier relationships and lower risk by reading this Spend Matters Perspective.
Download sponsor: CombineNet, Inc.
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When it comes to saving money in packaging categories (e.g., corrugated, plastics, glass, etc.) the old fashioned sourcing hammer will only get a company so far. The same is true of stand-alone packaging engineering and redesign efforts. What's the secret to achieving new savings levels? Combining sourcing and engineering together. Learn about the types of results that are possible in this Spend Matters Perspective as well as a crawl, walk and run approach to achieve returns by integrating sourcing and engineering to drive packaging savings.

Download sponsor: Provident Spend Management