Level 2 on the Spend Visibility Curve: Spend and Supply

big data

I recently introduced a number of foundational ideas and arguments about spend visibility and spend/supply analytics maturity, which I first introduced in the Spend HQ webinar The Spend Visibility Curve: Where Do You Stand. Central to my argument are four stages of maturity that procurement organizations pass through as they move to supply analytics nirvana.

The first level of maturity I explored in this series was what I termed “sourcing and measurement.” In this post, I introduce some of the thoughts that factor into my argument around the second level of maturity: spend and supply.

During the webinar, I began by noting that level 2 spend analytics maturity is not just about achieving certain results. It’s more of a mindset. In fact, some procurement teams will never fully get here. And that’s just fine, as staying at the sourcing and measurement level is a fine place to start and even remain. But for those organizations that progress to spend and supply, a new philosophy and approach to analyzing data begins.

This starts with fully considering a broader set of metrics and KPIs for both the spend and procurement performance measurement introduced at this level, not to mention the business outcomes that come from enabling continuous visibility. These metrics and measurement areas may include looking at performance, risk, budget, disbursement, profitability and broader overall organizational considerations. And moving beyond purchase price variance (PPV), the types of questions that procurement organizations begin to ask at this level include items that get to what is driving spend, what is really driving savings and how to get greater value from spend and suppliers while spending less.

In summary, at the spend and supply stage of maturity, companies begin to to peel the spend onion as they look at more information in new ways. This includes:

  • Beginning to take a category centric view of spend visibility
  • Emphasizing program frequency, continuity, stakeholder engagement, expanded analytics questions
  • Fully factoring into account supply considerations that include engaging stakeholders on preference considerations

Finally, at this stage of maturity, savings typically come from improved budgeting and budget impact from procurement initiatives based on visibility into data, reducing total cost based on analytics visibility, ongoing category management and stakeholder engagement.

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