Procurement BPO: Understanding an Offshore Operating Model For Spend Analysis (Part 2)

In the first post in this series, we covered some of the basics around how procurement organizations should plan to set up their processes to best interact with BPO providers. This material is based on the Spend Matters/HfS Compass series paper: Designing an Optimal Procurement BPO Program: Process Expertise and Realized Improvement (free, registration required). Today, we'll continue this analysis by first looking at the role BPOs should play from a reporting perspective in vanilla procurement BPO engagements that include spend analysis. Then, we'll graduate to a handful of more advanced use cases. When it comes to reporting, all BPO companies engaged for spend analysis should take responsibility for at least the administrative components of building spend analysis cube data including specific tables, views and reports based on the buying organization's requirements.

Underpinning this and related process steps should be a lean and/or Six Sigma type program focused on efficiency, speed and overall data quality. The BPO should also take responsibility for publishing spend data, cube data, and related reports periodically based on a client's timing requirements. But maintaining some degree of flexibility and ability to respond to organizational queries is key, as ad-hoc report creation is also essential. For organizations wanting the next level of spend analysis benefit by combining together different data sets with tools from providers like BIQ or Endeca, your BPO partner should be able to support the use of this technology internally and also provide the ability to interact with internal company spend and sourcing analysts who may wish to partake in the drilling into mashed-up datasets themselves, looking for creative ways to drive savings strategies.

In another free, Compass series report looking specifically at advanced spend analytics use cases, Beyond the Basics: Using Spend Visibility to Drive More Than Category Sourcing Strategies and Spend Reporting, we offer insight into the types of next-level strategies your BPO partners should be deploying as well to drive additional savings opportunities. As we note in this paper, such types of data set combinations may include: "tax/VAT payments (and types), budget data (vs. actual), sourcing and category intelligence information (e.g., savings data), commodity market pricing feeds, marketing analytics data (and competitive marketing data), credit and P-card information, supplier financial risk data, vendor files with invoice detail (e.g., line-item detail for computer hardware, commercial printing), inventory data, services/contingent workforce data (e.g., comparing contract markup with actual markup as well as variations in bill rate and pay date), payment terms including working capital/cost of capital (both buyer and supplier), logistics data (carrier direct or aggregated by a 3PL) and claims adjusting information."

Moreover, companies may want to investigate their BPO's ability to link spend analysis to savings tracking and overall savings implementation. ICG Commerce has shown Spend Matters a beta toolset in this area that appears surprisingly unique, even though the underlying premise is actually quite simple for financial-types to get their heads around. Zycus also has some new capability in this area as well, which we just saw yesterday, and plan to cover in the near future.

Don't forget to download your free copy of Designing an Optimal Procurement BPO Program: Process Expertise and Realized Improvement.

- Jason Busch

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