Sourcing and Measurement: The Start of the Spend Visibility Journey

spend visibility

Yesterday, I shared some of my foundational arguments about spend visibility and spend and supply analytics maturity from a Spend HQ webinar, The Spend Visibility Curve: Where Do You Stand. As part of this discussion, I introduced a 4-stage spend visibility maturity model that begins with what I termed “sourcing and measurement.”

I started the introduction of this initial phase by noting it is important to realize this is not just the first level in a journey. Sourcing and measurement provides a spend visibility foundation that continues throughout the model and, in fact, has its own layers as well.

Nor is this first phase just about pursuing low hanging fruit; rather, it’s about developing a cohesive strategy to sourcing, implementation and measurement opportunities based on data visibility. The phase is also about considering spend analysis and sourcing linkage, including the information steps that bridge the opportunity between identification and analysis, sourcing execution and eventual savings realization.

Examples here include charting capability to support this linkage that maps such characteristics as difficulty of achieving savings on a category or grouping level against overall expenditure or potential budget impact. Many vendors have this today. More advanced approaches expand on spend analytics and sourcing linkages by suggesting specific categories and strategies based on spend characteristics.

Generally speaking, at this stage, procurement organizations:

  • Use spend analysis to begin identifying, implementing and measuring savings opportunities
  • Develop insights into sourcing and supply strategies based on initial data visibility
  • Focus the “procurement laser,” as one consultant put it to me, with “limited organizational change required”
  • Drive specific procurement and “recovery” opportunities with sourcing a key focus
  • Begin to examine often stealthy ways of driving finance and procurement engagement. This includes agreeing on baselines and savings metrics, but all with a peel the onion-type nuance.
  • Tend to put emphasis on: spend coverage, classification, strategy, savings and  procurement-centric analytics, versus those other stakeholders in the organization might consider

Finally, at the sourcing and measurement stage, savings primarily comes from sourcing efforts based on data visibility usually based on individual events or projects. In other words, initial phase spend visibility really amounts to a sourcing or category hacker’s dream in areas where few savings opportunities have been pursued before.

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