In the first post in this series, I gave an update on BravoSolution's customer penetration statistics by solution area and highlighted some of the more advanced use cases for spend analysis their customers are deploying. We'll continue the analysis today and in subsequent posts, getting very specific about ways that organizations can use tools such as BravoSolution to take their spend analysis, supplier performance management and overall negotiation/supplier management efforts to the next level by looking at data sets and combinations in new ways. Perhaps the ideal area to start is the best place to mine for spending gold -- in "recoverable" data buried at the surface of the savings mine.
In this area, BravoSolution shared with Spend Matters a use case showing how spend analysis users can use an automated matching process to map contract details to line item level information in a purchase order or invoice information back to contract terms within a CLM tool or contract repository. This can enable the ability to audit activities, including invoices and payments, on a granular level to look for recovery opportunities such as discount capture based on volumes or other thresholds, not to mention more routine spend analysis opportunities including looking for off-contract spend with contracted suppliers (or spend that should have been invoiced based on contracted terms). By looking at variance and variances percentages in the spend tool itself, it becomes much easier to spot opportunities quickly, not to mention flagging and prioritizing those for recovery, follow-up or action.
I actually had Bravo step through the process of bringing contract data into the system from different sources, including raw information from contracts, for example, and it's definitely something that a business analyst or trained procurement user could rapidly do. The process, before an automated refresh process, is very similar to bringing standard data-sets into a spend tool (e.g., starting with identifying source systems, opening the data source, profiling/validating data, cleansing and classifying it and then making sure it reconciles into the right format and structure amongst the other data sets before moving to the analysis phase). If you wanted to look at contract data in the context of actual PO and invoice information, you might specify contract fields such as currency, unit price (simple or complex), discount structure, etc. in the data identification and upload phase.
BravoSolution told Spend Matters that less than 25% of their current spend analysis users (regardless of what contract management system or approach they have in place) are using spend analysis in this advanced manner. But in recent customer deals, more than 50% have this type of approach on their radar to deploy once they go through the basics. Which, of course, makes perfect sense because who wouldn't want to leverage the solution for more advanced savins areas, such as rapidly analyzing expected payments relative to variance and then going back to suppliers and attempting to reclaim the difference if it can be justified? Not only does this keep suppliers honest and on their toes -- it also represents an immediate recovery opportunity (and justifiable spend analysis ROI) versus having to go through a strategic sourcing or related effort to even identify a specific savings number before implementing it.
Stay tuned for further analysis of how BravoSolution and others are leveraging spend analysis tools in new ways to aid not only sourcing strategy development, but also additional supplier performance management, audit recovery and related opportunities.