PixabayMost procurement organizations without the right tools face the same variety of issues. They have data, ridden with manual errors, spread across multiple systems, and spend data taxonomy that is designed for accounting, not procurement. As a consequence, procurement organizations lack insight into their savings levers, have minimal visibility and control of their spend, and exhaust their resources on ad-hoc data-cleansing projects in order to reconcile millions of dollars’ worth of unaccounted spend.
High-maturity organizations — ones that have invested in spend analytics technology — have a drastically different experience. Here are the top traits of digitally mature procurement teams:
- It takes less than an hour to produce a breakdown of all organizational spend and therefore spend analytics can be conducted on an ongoing basis. Data might be spread across multiple systems, but it can be compiled for analysis as it is fully synced, standardized and enriched with accurate details (e.g., order volumes, supplier scores).
- Sourcing is always strategic — for direct and indirect materials. A high-maturity organization knows its spend, supplier risk and savings opportunities within and across each category because it is formally monitoring and documenting the key details of every sourcing event (e.g., supplier certifications, geography).
- All contracts are visible. All spend data can be traced back to contracts that have been properly stored and are searchable. Upon expiration, the value or ROI of a contract can be assessed and measured so that procurement can renew contracts with intention rather than reactively or even passively.
- They know which suppliers to consolidate or prioritize by seeing where the most savings are lost and why, whether that be due to price adjustments, contract non-compliance, geopolitical disruptions or other issues.
- They drive impact through category management. Procurement professionals keep track of both financial and operational data at a sub-category level in order to understand cost drivers and track category-specific KPIs (e.g., carbon emission reduction, supply quality, lead time, price competitiveness). As such, high-maturity procurement teams take part in executive discussions – such as product/SKU rationalization and elimination – because of their atomic, bottom-up assessment of the business, category by category.
A high-maturity procurement team with all of the above traits raises its company’s EBITDA from a private equity lens. Watch our webinar to learn about how a high-maturity organization with advanced spend analytics can drive portfolio value.
In effect, these companies end up spending a lot less time on reverse-engineering their savings leakage or data-cleansing projects, and a lot more time on maximizing deals and tying their procurement activity to revenue. Procurement’s role is increasingly important to keeping businesses afloat in a rapidly changing market, but procurement professionals can only rise to the occasion with the right technology at their side. Request a demo from SpendHQ to see what “high maturity” can mean for your organization.
