PRGX and more on Spend Analytics – essential tools for procurement

We introduced PRGX and their SpendTrax spend visibility platform here recently - we were impressed at our demo by its speed and usability. In part 2 today, we’ll look at what you can do in terms of more detailed supplier analysis using this platform.

The supplier management tool enables the user to dig into a specific supplier in more detail. As well as taking the basic spend data – probably from one or multiple ERP feeds – the platform enables the user to bring in other relevant external feeds, for instance from information providers like D & B or Bureau Van Dijk.

The user can then start making basic or more complex comparison across suppliers – looking at price comparison at item level for instance. How has the price charged for similar items changed over time across a range of suppliers?

The ability to identify different entities with the same parent leads to a number of opportunities, from the simple – standardising prices or looking to use spend  leverage across a parent firm – to the more complex. Looking at “supplier hierarchy risk” can be interesting – how much dependence do you have across all the elements of a parent firm?

We can then bring compliance issues into the picture as well. How does internal compliance to preferred suppliers or deals compare across different spend categories? Across business units in our organisation? Or between different suppliers in the same category?

As well as compliance to preferred suppliers, the platform also enables detailed analysis of purchase order compliance, given of course the appropriate feeds from P2P systems. The percentage of spend invoiced that has an associated PO can be analysed, including looking at where any declines in compliance are occurring (again, this can look at categories / suppliers/ business units etc.)

There is also a contract management module, although we didn’t get into that in detail. Factors such as contract end dates can be included, then that data can form part of the reports and analysis obtained via the platform.

As we get into the more sophisticated analysis, PRGX will generally work with new clients to develop and configure a range of reports that suits the client. There is an off the shelf option, but as Sajid Ghani  (MD of the PRGX Analytics business) says, “everybody wants something bespoke”! That’s not surprising given the real power of the platform.

“We aim to help users move from spend analysis to savings opportunities” is another favourite PRGX expression. And, while they're not the only provider with this level of capability, that’s really what differentiates what we might call a “power platform” in analytics terms from some of the more basic offerings around. It really does take you quickly into real opportunities, not just give you a pile of data.

But there’s a chicken and egg issue here.

Until you’ve seen what a very powerful analytics engine can give you, it is quite difficult to get your head around the possibilities and the potential benefits. So when organisations come to market, the specification often does not include many of the features (and ultimately benefits) that the best platforms can offer. So we’d advise anyone buying spend analytics for the first time to engage with the market to understand what is possible before issuing an RFP or similar – and perhaps talk to existing “power users”.

Understand what you can do, and that will enable you to frame any approach to the market better. And there’s no doubt that a really effective tool like SpendTrax can be hugely beneficial for organisations and procurement functions.

Voices (3)

  1. eSourcingSensei:

    Spend Analytics (SA) is certainly an interesting arear to review. I have not seen or heard anything of the above tool so I am not commenting about the specific tool rather from past experiences.
    Analysing your companys spend is a key activity many businesses still do not engage in fully before going out into the market place to tender their requirements.
    However the SA tools I have seen so far do not, for me go far enough. They are great at looking at the total purchasing spend of an organisation, even segmenting that spend across and within portfolios, analysing order quantities from the ERP system and tieing that back into the analysis.
    But how about tying it into more of the total cost that supply has, or can have, to a business.
    Such areas as RFT (Right First Time) if the data is available and the costs incurred when it is not RFT, storage costs due to MOQ (Minimum Order Quantity) either imposed by the supplier or because planning is unreliable so you hold safety stock, the costs of planning changes and so last minute requirements from suppliers that may incur costs above the negotiated price.
    Analysing Spend always seems to stop just at what Procurement put out to tender – so simplisticly the items in the RFQ/P/Auction.
    If you are able to gather all of the total cost data together at the fron end and then intorduce something more akin to an Optimisation tool, that can really deep dive and interrogate what the total cost of having that item supplied to your production line, then I think we can really get into the detail of spend.
    Anyway just a thought 🙂

    1. Grant Watling:

      Great comment by eSourcingSensei. That is certainly the capability more advanced platforms are offering. One of the areas we also consider in our merchandise analytics reporting are things such as gross purchases vs purchased diverted out and freight charges to give a true net purchase position. We then look at allowances, billbacks, swell, accruals, and other rewards to help users establish true profitability per vendor and derive a clearer value based relationship.
      Helping users understand and find value in data – no matter how big – is the core function of best in class analytics and should certainly be an expectation for users today.

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