The Spend Management Category

A New Spend Metric: “Touched Spend” — Do We Need It?

AnyData Solutions

One of our Spend Matters Plus clients, a procurement manager in the energy sector, sent me a note asking about a new benchmarking metric that he recently saw being collected by CAPS research called “touched spend.” He sent me the following definitions below and asked me to weigh in on them, given my tenure at The Hackett Group running procurement research related to benchmarking, for sourceable spend, managed spend and also "touched" spend.

Navigating The Path From Tactical Procurement Analytics to Strategic Supply Analytics [Plus+]

spend visiblity

Spend visibility is foundational to any procurement transformation because to better manage supply, you have to manage spend. Spend is what you pay and supply is what you get, and to manage spend you have to see it. Yet too many procurement organizations work hard to put basic spend analytics in place but don't have a broader vision, strategy and roadmap for strategic supply analytics (i.e., the analytic capabilities to support strategic supply management). We use the term “supply analytics” instead of “procurement analytics” to reflect procurement’s increasing role in managing broader supply outcomes than just its own performance – especially in direct procurement. This Spend Matters PRO article is designed to provide you such a roadmap. It is not a step-by-step, one-size-fits-all approach because every firm will have a different experience. It is, however, a map that can guide you through plotting out your supply analytics journey.

Why Procurement’s Persistent Tail Spend Problem is Now Finally Solvable

Tail spend frustrates many procurement groups. It’s messy, it’s complex and it’s time-consuming to tackle. Inking big deals and keeping stakeholders happy seem like far better priorities for the typical category manager, since that’s how he can turn executive heads and make his daily life simpler. At least, that’s how it used to be. These days tail spend is trending — and for good reason. Here are three reasons why this persistent thorn in procurement’s side is finally getting the attention it deserves.

What’s the Cost of Having a Long Supply Tail, and How Do You Determine the ‘Right’ Supply Base?

tail

We recently put up an interactive Ask Spend Matters box so that you, our readers, can tell us about the topics you want us to investigate. One of the first questions that came in was about tail spend: “What is the cost of having a long supply tail, and how are organizations determining the ‘right’ supply base (number and percentage) as relates to spend?” As Spend Matters Chief Research Officer Pierre Mitchell put it, "This is a great question, but it’s a bit tricky to answer.” Read on to hear his reply!

Designing a Spend Category Taxonomy Properly is Harder Than You Think (Part 2: Go Deep) [Plus+]

category management

We recently had a client ask us if we could offer specific guidelines or methodologies for creating a spend category taxonomy within the automotive and industrial markets. The question resulted in a discussion among a number of us with industry experience. And since we didn’t have any research already published on the topic, we thought we’d invest the time to document our findings. In this second installment of a two-part Spend Matters Plus research series, Chief Research Officer Pierre Mitchell explores how granular procurement should go in creating a spend taxonomy and concludes with practical tips for implementing a program.

Designing a Spend Category Taxonomy Properly is Harder Than You Think (Part 1: Do This, Not That) [Plus+]

category management

We had a question from a client of ours about whether there were any guidelines or an overall methodology to coming up with a spend category taxonomy. It’s a simple question, but there isn’t a simple answer. So, we thought we’d offer some insights to help guide your efforts. But before we say what to do, there’s a quick recommendation on what not to do. In this first of a two-part Spend Matters Plus series, Chief Research Officer Pierre Mitchell explores how to think about creating a spend category taxonomy, pitfalls of incorrect approaches, and how to embrace an approach that cuts across categories and spend types.

Mega Spend Aggregation: 10 Ways to Supersize your Market Basket (Part 2) [Plus+]

category management

In Part 1 of our coverage on this topic, we started our discussion of various techniques to “supersize” your market basket, with an eye toward indirect spend. In this second half, we will now turn our attention to the supply chain for the remainder of the techniques.

Mega Spend Aggregation: 10 Ways to Supersize your Market Basket (Part 1) [Plus+]

category management

Most procurement organizations complain about diminishing savings on re-sourced categories – and rightly so. But rather than beating the same horse, why not hitch up more than one, and in new ways that you may not have considered? In this Plus piece, we’ll outline five of them, with the first one being "expand the 'lots' in your current market basket."

Deploying S2P Procurement Software Yields Big Savings: Case Study Results

category management

Join Spend Matters, MetalMiner, Ivalua and the University of Chicago Medicine for our upcoming webinar that will outline the results of a case study on UChicagoMed's successful deployment of a cloud-contract management technology platform. Spoiler alert: It yielded major savings. Xavier Olivera of Spend Matters Mexico-Latin America will frame the discussion with the evolution of procurement software in the S2P software landscape, spend management trends in healthcare and more.

Emerging Procurement Platform Trends and Technologies: Webinar Tomorrow



Is your procurement function using a platform-inspired approach to transcend savings from simply spend management? If not, then now might be the time. Join Pierre Mitchell and Julien Nadaud, chief product officer at Determine, tomorrow at 10 a.m. CST for Designing the Procurement Virtual Factory — Reinventing Procurement Through a Platform. Pierre and Julien will focus on the digital requirements to support new procurement and spend approaches, as well as how technology firms are trying to cope in a brave new world.

Rethinking and Reclaiming “Tail Spend”: 6 Key Variables to Consider [Plus+]

AnyData Solutions

The idea of “tail spend” doesn’t seem very complicated at first.

Run a Pareto analysis on your spend categories and suppliers to make a cutoff at, say, the 80% that represent only 20% of your spend. Your numbers will, of course, vary, but the idea is to find a way to better manage such “nuisance” low-dollar spend that doesn’t detract from your efficiency, or worse yet, from spending time managing the truly strategic spend categories more deeply.

You might think of this as the spend in the lower-left quadrant of the famous Kraljic 2x2 matrix, which describes a strategy of “purchasing management” to manage non-critical, abundant supply that can be sourced locally in a de-centralized manner for maximum efficiency. And, maybe, if you manage this nuisance spend properly, you can even extract some value from it (e.g., a “quick source” process to gain some speedy spend savings).

Sounds straightforward, right?

Well, it’s not, and I have purposefully led you astray to prove a point.

The problem is that I never really defined tail spend in the first place – and if you can’t define it or see/measure it, you can’t manage it. And herein lies the rub (and the opportunity):

Tail spend could better be described as “nuisance spend” or “tactical spend,” and is comprised of many sub-segments — not just one or two.

Let’s return to our examples above. Segmenting on a spend-per-supplier basis, like in our Pareto diagram, is by no means perfect. What about low-spend, sole-source suppliers tied to large revenue or profit? OK, well, you might then refer to the Krajlic matrix as the solution. It’s better, because it helps profile the categories into complexity vs. impact (or risk vs. reward if you view it as such), but again, these are only two variables, and do not factor in any others.

Which ones? Let’s list six of them and ask whether you’d consider the resulting spend segments as ‘tail spend,’ or at least ‘nuisance spend.'

Coupa Release 17 Analysis — And a General “How To” Lesson for Upgrading Products [PRO]

On Jan. 27, Spend Matters published a quick post on first update of the year, Release 17. It offers a new application called “Perfect Fit Insights” for cross-customer B2B insights and more than 50 features across the platform, including new collaboration mechanisms to work with suppliers (SMS messaging and extended sourcing communication windows), additional e-invoicing compliance templates, and additional system configurations options such as extended customer branding. Recently, Donna Wilczek (VP of Strategy and Product Marketing at Coupa) and Gabe Perez (General Manager of Power Applications at Coupa) gave us a demonstration of Release 17 and talked to us about their innovation process and other analyses they do to continually improve the user experience, usability and value of their platform.

Coupa has a long history of out-innovating the competition, and this is not an accident. The company uses a rigorous process to identify, prioritize and implement ideas — putting the customer front and center in helping drive innovations that have the highest probability of actually being adopted.

In this Spend Matters PRO analysis, we’ll share what we’ve learned about Release 17 including expanding more on its new features and our key takeaways from them. We’ll also discuss Coupa’s general release planning, development and roll-out methodology to capture ideas that drive practical (and usable!) innovation for customers.

These are critical lessons that should not be lost on organizations evaluating Coupa in comparison to other vendors (which generally innovate more slowly), let alone any other provider developing technology to bring to market.