Should spend analysis and supplier performance management datasets stand-alone? That depends on whom you ask. BravoSolution, which we've been profiling in this recent mini-series looking at solution usage and innovation (Click here for Part 1 and Part 2), is increasingly being asked in more advanced spend analysis implementations to pull in either, or both, supplier performance and contract management information into their analyses. Through this process, companies can view what Bravo terms "full-circle performance tracking", breaking down high-performing and low-performing suppliers in the context of examining overall spending details and relationships. They're accomplishing this through a process that starts with both survey data and systems information and then combines these fields into consolidated results. Next, the batch feeds from spend analysis are joined with additional supplier performance management data which finally feeds into the OLAP environment for viewing, slicing/dicing and analysis.
While this process might sound complicated -- and certainly it's no walk in the park, given the need to normalize, classify, cleanse and present the right fields in both context and concert -- it's possible with minimal fuss, provided the underlying source feeds exist. And the value is undeniable. The ability to look at trending and benchmark (based on the broader supply base) data from a performance perspective at the same time as drilling into sourcing and recovery opportunities -- not to mention alternative suppliers -- can add a new dimension to opportunity analysis and risk mitigation. For example, this type of analysis might reveal that that given the reduced performance level of one supplier, the largest incumbent, and rising performance of another, it might make sense to simultaneously shift a percentage of spend to the alternative vendor while investing in a supplier development effort for the incumbent.
By combining this type of information in a common environment and arriving at an overall score oriented around a range of transactional information combined with both qualitative and systems-based performance data, organizations can begin to gain a unified view of what they're paying to suppliers on a highly granular level in line with their actual performance and contract adherence. But clearly, this type of data and analytical nirvana is not possible across a broad set of suppliers. Bravo told Spend Matters that organization at this level of sophistication from a spend analysis and SPM perspective are likely tracking in the "low hundreds" of suppliers at this level of detail. For other critical suppliers (e.g., the next 200-1,000), a company might opt to collect and aggregate less information, for example pulling on-time delivery, quality and related metrics off of the auto-generated information (while not requiring the input of qualitative surveys and related information). For this second tier of suppliers, organizations can pull in ERP-generated goods receipt data as part of the standard refresh process (or could, in theory, opt to pull it at any point in time).
One of the most important benefits of this approach for the most critical suppliers and the next tier down is the ability to benchmark supplier results against each other and create baselines from which to better engage and manage suppliers over time. Above and beyond performance data, it's also possible to pull external risk information into the same analysis (as it is with a range of spend analysis tools) to gain more insight into whether a performance related issue could be related to financial stability. In Bravo's tool, companies can leverage a combination of spend, performance and risk information to calculate overall scores by supplier and commodity to understand where to best focus their efforts.
In their spend toolset, organizations are also beginning to pull in payment term information into the spend cube environment as well. Looking at this data in concert with the rest can help organizations to best identify suppliers offering different terms across business units and to then consolidate contracts based on the most favorable terms. Such analyses can also help identify suppliers that do not currently have discounted payment terms available; other companies have used similar views to identify which suppliers (based on spend profile and terms) might be best suited to pushing onto a p-card.
Concluding our look at how BravoSolution's customers are using spend analysis tools in new ways, I'll quickly share Bravo's model for data enrichment. Bundled in with their spend module is what they term "basic" enrichment information including the ability to create parent/child linkages, classify by commodity code (e.g., SIC) and add other basic data elements such as employee count, turnover, etc. This is provided as part of the basic spend analysis package without additional charge. However, companies have the option of purchasing additional enrichment information on a per supplier basis for supplier risk and diversity. They can also opt to purchase Bravo's supplier performance management or contract management modules as well, to include this data as part of a broader, more encompassing spend analysis program (or they can include data from third-party supplier performance and contract management tools or simply word/excel/flat files as well).
Stay tuned for the next post in this series when we look at current use cases around optimization and the Bravo user base.