This is the final part of a three-part interview series with Michael Schmitt. Schmitt, who many credit with developing the Spend Management movement, is currently an advisor to Ariba. Formerly, he was CMO of Ariba.
Spend Matters: What's next for procurement? Once you've started with the basics (e.g., spend visibility, eProcurement, strategic sourcing, contract management), how can purchasing organizations continue to create new areas of value?
Michael: Advanced organizations need to look both internally and externally to expand beyond basic Spend Management. From an internal perspective, it's critical to go granular -- look at specific categories, line item detail, etc. Only through getting down to this level, can an organization created a new, sustained level of savings. Also, go deeper on warranty issues, demand usage patters, etc. And consider supplier performance management -- this is where advanced spend analysis capabilities really separate from ERP and data warehouses. What we call "level 4" detail is key. It’s not high level. And it's not in ERP or ERP SRM. With level 4 detail, you've got tools to track contract details and buying invoices and to match them up. You can ask questions like: did I get the right freight (terms and charges) and is the warranty information accurate and stacking up against our contract specifications? In short, this level of information enables you to gain complete visibility between contracts, invoices, and analysis -- across systems.
Spend Matters: What about from an external perspective?
Michael: Externally, advanced organizations need to collect new detail on the open supply market. What are the market conditions going on? Are there new and innovative supply market opportunities? It's essential to continually monitor price points, availability, service levels, and supplier quality on a global basis. This is because change is happening faster than ever before. A supplier might be fine today, but their quality could decline overnight. It happens so fast and new competitors enter markets in a matter of months. This can propose a new risk because traditional suppliers are losing marketshare, which can negatively impact their financial and operationally stability.
Those who have a top notch Spend Management system can monitor and react to internal and external changes and information quickly. Being proactive is critical. Those who are reactive will never take full advantage of the cost avoidance or savings Spend Management can bring.
Spend Matters: Where do you go to learn about Spend Management on the web? What analysts, magazines, etc. do you keep up with?
Michael: Spend Matters is my top destination for quick hits about what is going on. You update more frequently than anyone else and link to what matters. I do read other web pages, news and analyst sites, but besides, I think it is our own networks with companies that can teach us the best. It's critical to stay close to practitioners, to those who practice "Spend Management" in the field. The voice of the customer is really want counts. You can teach them, but they can also teach you.