Over on our sister site, Chief Procurement Officer, I have been discussing the perfect order measurement and how to adopt the metric for your procurement organization. While the perfect order metric may sound simple, the implementation can be complex. This Spend Matters Plus article will focus on how to address and overcome this complexity, as well as how to implement the perfect order effectively. I also touch on the benefits of perfect order, including how it enables better measurement of supply chain performance. If you want to measure perfect order performance, you have to ask yourself a lot of questions. Here are 5 key questions to ask and adapt to your organization regarding the perfect order metric.
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Data ‘Enrichment’ is the Future of Spend Analysis: A Flashback to Our Most Popular Ask the Expert Webinar [Plus +]
It’s another Flashback Friday where we feature one of our most popular Ask the Expert webinars. Today's pick: Spend Analysis and Analytics: Theory and Practice, which was led by Gert van der Heijden, editor of Spend Matters Netherlands, back in March 2014. In this webinar, Gert focuses on the future of spend analysis, which he said would include advanced analytics and better data to improve risk management. Gert predicted “data enrichment” would be the next “buzzword” for procurement and spend analysis. While spend analysis is the basis for every procurement department, he said, that data needs to be “enriched” in order for the spend analytics process to be effective and valuable. Check out the full webinar recording here...
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.
On this Throwback Friday (#tbf, anyone?), we've thrown open the doors to our archives to bring you our second-most-viewed recording of an Ask the Expert webinar of all time. Spend Matters Chief Research Officer Pierre Mitchell takes participants through the important procurement topic of PPM in Ask the Expert: Procurement Performance Management (PPM): The Ultimate Alignment Tool - Not a Dashboard! . Procurement performance management can transform a procurement organization – but only if you know how to apply and maintain the tool or process properly. Pierre walks us through a number of steps to properly integrate PPM into your procurement organization. If you missed this webinar late last year, luckily as a Plus or PRO member, you can view the entire recording right here.
Earlier this week, we began our series analyzing the new AT Kearney 2014 ROSMA Benchmark Report, “Building the Brand of Procurement and Supply.” I first talked about the context and how the report analyzes ROSMA’s scores. Then, in a Plus post, I dove deeper into our analysis of the report, and I shared some of its highlights. Today, I’ll talk efficiency – what firms are the most efficient and why.
We've been talking for some time on the different Spend Matters sites about how social media principles and approaches will inevitably make their way into the business and procurement world, yet progress has in reality been pretty slow. The innovative Rollstream has been assimilated into GXS, now itself part of OpenText, and seems pretty low-profile these days. However, there are signs that things are changing. Sourcemap is a more recently established firm that has an interesting approach, including some aspects of supply chain collaboration with a social media slant. Mark Perera, one of the founders of Procurement Leaders, is involved in Old Street Labs, whose new Vizibl platform is in its testing phase (we'll feature it as soon as you're ready, Mark). The platform looks to use some of the core social media principles in a business environment. And now we have LeanLinking starting to make a splash. This Spend Matters Plus research brief, by Peter Smith (managing editor of Spend Matters UK/Europe), looks at what LeanLinking has to offer and which organizations would benefit from the technology.
Purchase Price Variance (PPV) in Procurement and Savings Strategy: Limitations and One Potential Use [PRO]
There are many reasons why purchase price variance (PPV) is not the best metric to track procurement performance. In last week’s Spend Matters PRO research brief, Why Purchase Price Variance (PPV) Should Be Banished From Procurement Measurements and KPIs, Jason Busch (Managing Director) and Pierre Mitchell (Chief Research Officer) gave 10 reasons why PPV can be misleading and how smart procurement organizations in the market have long since moved past it. These reasons include the fact that declining and rising cost variables outside of a buyer’s control can have a significant effect on individual part costs not reflected in the actual performance of a procurement manager and the fact that PPV fails to measure true lifecycle costs. In today’s Spend Matters PRO research brief, Jason and Pierre start by providing a summary of the first analysis and then explore a scenario where PPV may actually be a useful means of measurement, courtesy of Tungsten’s new network analytics capability.
One of the biggest challenges to overall program impact and improvement in all but the most advanced procurement organizations are the raw elements that many procurement organizations measure themselves against: key performance indicators or KPIs. One of these, purchase price variance or PPV as it is often known, is particularly obnoxious in all but certain cases. PPV measures the difference in price paid for across a range of purchases for a similar SKU, part, or service.
There are many reasons why PPV can be such a misleading figure.
In this first of a two-part Spend Matters PRO research series, Managing Director Jason Busch and Chief Research Officer Pierre Mitchell explain why precisely PPV is a KPI that procurement organizations should stop measuring internal and individual performance against. Part 2 will present the one case in which it might be helpful to police suppliers more accurately (courtesy of a new, real-time network approach to gathering spending data from Tungsten based on actual line-level invoice information that we believe will eventually become standard across many supplier networks).
We’ve always found the subject of valuation for technology companies a curious topic, one that we could probably bore too many people with during cocktail hour conversations. Last fall, we wrote about the topic of valuation in the Spend Matters PRO brief Procurement Vendor Valuation, M&A, and IPOs: Recent Deals and 2014 Forecast, touching on many of the elements in valuation play right now. But this analysis says little for the fact that we appear to have a market at the current time that is bifurcated between certain vendors (e.g., Fieldglass) worth 8-12X topline revenue (or higher in the case of certain private investment rounds) and those like Intesource and Iasta which are going for less than two times their topline. In today’s Spend Matters PRO research brief, Group Managing Director Jason Busch and Spend Matters Group Managing Richard Lee offer up a perspective on what elements appear to be driving valuation and multiples in this market beyond the basics of SaaS and related valuation drivers in the procurement, supply chain, and finance areas.
The 2014 Forrester eProcurement Wave is out (Coupa and Basware have both made free versions of the report available on their sites). In short, Garrison Keillor would be happy with the results. I can almost hear the radio program now: "Welcome to this installment of the Forrester eProcurement Wave … where all the women are strong, all the men are good looking, and all the vendors [at least those who made the cut] are above average.” All vendors listed rank as "Leaders" or "Strong Performers" – no provider falls under the "Contenders” or “Risky Bets” areas of the comparative graphical chart. However, the report is as important for those providers that are not included, as those that are (and their relative comparative rankings). Generally speaking, the Wave appears to be a thoughtful piece of research – albeit one we don’t agree with in every area. But most important, the ratings transparency – readers can see the ratings that led to the conclusions – makes it more useful than Gartner Magic Quadrants, which are more opaque. Spend Matters PRO readers can read our commentary on the report, strategies for eProcurement technology selections, links to more tailored vendor lists / selection strategies and providers for shortlist consideration that Forrester did not include.
Diving Into the Hackett Performance Exchange: Automated P2P Benchmarking for SAP and Oracle ERP Users [Plus +]
One of the key techniques to process improvement is performance benchmarking. For those firms that use Oracle and SAP ERP applications, particular those running single instance environments, The Hackett Group offers a hosted performance dashboard for P2P (and other processes – but P2P is the only procurement-specific one) called The Hackett Performance Exchange. It is a subscription-based solution that marries Hackett’s procurement and finance benchmarks for P2P with data extracted from a client’s SAP (ECC) or Oracle (E-Business Suite) ERP system to provide the firm with a monthly view of their performance relative not just to themselves (i.e. trending), but also to top quartile performers (and peers) from Hackett’s ongoing benchmarking database. Read on for Chief Research Officer Pierre Mitchell's analysis of the service.
Earlier in the month, Spend Matters had the chance to catch up with the team behind Tungsten Network’s new spend analytics offering (note, OB10 is now Tungsten Network). The solution is quite different from just about any other approach to spend analysis in the market today. It’s not perfect and it’s not a full replacement for other spend analysis tools – yet. But it very well could be the future of how procurement and finance organizations together look at spend and supplier analytics on a near real-time basis using network data exhaust rather than taking an ETL- or batch-based approach to manually extracting data from systems (in the case of Tungsten, network data is updated hourly). Moreover, the model could prove initially to be a complement to other solution approaches while ultimately upsetting the entire analytics apple cart based on a different philosophy and approach to actively capturing highly granular line-level invoice information. Jason Busch, Managing Director of Spend Matters, covers Tungsten analytics for PRO subscribers and provides a list of recommendations to potential customers.