Poor Richard Weighs In On Spend Visibility

Jason just concluded about 2 months of some great posts in the area of spend visibility (or analytics, if you like), exploring new offerings, etc. Whenever I read about spend visibility, I feel like an old man because of what seems like a lifetime of work I've put into the subject. Like an old man, I find myself repeating certain aphorisms that have served me well in the past. As with some of Ben Franklin's wise sayings in his Poor Richard's Almanack, however, some may or may not apply (I'm thinking of the one about the lady who was known for always smiling and laughing when in fact she was just showing off her nice teeth). Anyway, below are my simple truths when in the pursuit of spend visibility:

If you believe cleanliness is next to godliness (for your data), best find a priest
This happened much more in the early days, but I still come across companies looking for a solution that will clean up their data first and give insights for sourcing and compliance opportunities second. That's backwards. Keep your eye on the prize (savings) and allow yourself to be surprised with any side-benefits that point to cleaning master data. As it happens, cleaning/enriching data for sourcing is actually cheaper than going for god-approaching cleanliness anyway. That's because…

Pareto was right only 20% of the time and that made all the difference in the world
I suspect that procurement folks are, secretly, the biggest users and beneficiaries of the 80/20 rule. I don't see Finance, Sales or Engineering using it every day but I certainly know that given the task of managing thousands of suppliers, weekly MRP runs and so on obligates procurement professionals to tackle the 20% most important stuff first. Now, I'm not saying you only need visibility into 20% of your suppliers or items, but, don't for a minute think that 100% spend visibility is a good idea either. You'll either pay through the nose or get bad quality cleaning that would make all your data suspect. In fact, if you think any vendor can do all the cleaning for you without your involvement, remember this…

In order to clean things up, you gotta get a little dirty
Just as you can't wash your car in your best suit, you can't leave spend visibility worthy cleaning/enriching jobs to some blackbox vendor process (no matter how good their story is). Expect to have to QA their first pass and ask for specifics on how you'll be involved to give feedback to augment their work. The reason is that each vendor uses one or many tools and stored knowledge from past enrichments and those can address a lot of your spend but will still get hung up on a few key items that your company is unique in doing. The corollary to this rule is that vendors with one tool or who build rules simply based on your company are going to need even more help from you because you should always…

Respect the snowball
Referring to the snowball rolling down a hill gathering more to it faster as it grows bigger (and so on). This applies to the sum experience of your spend visibility vendor's enrichment knowledge-base if they've been good at paying attention. Ask about that, because it should lower your risk of failure, their costs and your need to "get a little dirty". References, resources and methodologies for using what they've learned count more than a…

Proof of Concept: like deciding a winner of the Daytona 500 after a couple laps
Yeah, it's cool to send data to multiple vendors and see how they do (how fast and how accurate). It doesn't test, however, the data acquisition, full spectrum of enrichment tools, feedback mechanisms, analytical capabilities (beyond what a demo would show anyway) or the ability to drive you to sourcing and compliance actions. Without seeing the pit crew in action or the stamina of the driver through every turn, you couldn't make a call on a race. References to their past is a better guide. Besides…

Gathering data takes longer than cleaning it:
As much as you may press a vendor on the speed of their enrichment/cleaning, make no mistake, your efforts to get data from your systems to that vendor will take longer. So gird yourself for delays in the overall project if you underestimate this first step; and try not to make it up by pushing for poor enrichment done fast. And as for the last step…

From analytics to sourcing (some assembly required):
Experts in sourcing are needed to take good enriched data from the analytics UI and make it actionable on the sourcing side. Software cannot bridge that gap and added intelligence about markets, prices, etc. are a help but still won't get you all the way there. You'll still need an expert craftsman to cut those raw diamonds before they can go in the display case at Tiffany's.

I hope these nuggets are helpful and I'm sure there is other "received wisdom" out there that I know I'd like to hear in the comments. As Poor Richard says: "Hide not your talents, they for use were made. What's a sun-dial in the shade?"

- Paul Noël

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