3 steps to unlock spend synergies through unified language

09/12/2023 By Rasa Raoufi, Co-founder, Mithra-Ai Solutions

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As a procurement professional myself, I have witnessed and been part of many procurement teams of different maturity levels and sizes. Their shared mission? Enabling business objectives — whether it’s growth, innovation, cost-cutting, compliance or risk management — by gaining control over the addressable spend across the company.

This mission hinges on an essential premise: that procurement becomes the go-to resource for stakeholders seeking guidance on external needs, benchmarking and more. In my experience, this status is only attained when procurement speaks the language of its stakeholders and demonstrates a consistent track record of adding value. And this is often what I missed all these years.

Step 1: Crafting a common language for success

The most underestimated element in achieving procurement objectives is the hierarchy or spend taxonomy that category owners employ. This taxonomy serves as a lens into the external landscape and the language used to communicate with internal stakeholders. On a grand scale, it’s evident that without the correct lens — one that’s both market driven and requirement centric — opportunities and threats within the market remain hidden. This, however, can easily be overlooked. I remember clearly (and continue to observe) how the lack of language led (and leads) to lots of frustration and endless discussions.

Step 2: Maintaining the established language

As expected, over 50% of procurement organizations have developed their own spend taxonomy; however, very few leader organizations maintain these common languages. It’s vital to recognize that maintenance must be an ongoing process. As business needs, suppliers and stakeholders all constantly evolve, so too should the common language. We have simplified this process for category owners and their stakeholders to have full visibility and exchange ideas so they are always in sync.

Step 3: Unveiling the hidden opportunities — harnessing synergies

This March, during our procurement summit in Berlin, we posed a pivotal question to over 100 companies across various sectors: “What are the primary obstacles hindering the increase of addressable spend in your organization?” The results were predictable, yet telling. 48% of respondents identified multiple source systems and IT dependencies as their chief challenge, while 25% cited the absence of a standardized and accepted procurement taxonomy across the organization.

In reality, it’s neither practical nor feasible for a multinational entity to possess a single source of data spanning all brands and entities simultaneously. Consequently, each source system carries its legacy procurement taxonomy, burdened with distinct system and resource constraints. This is, of course, the root cause of the challenge in expanding addressable spend.

Fortunately, our clients can now benefit from fit-for-purpose software to seamlessly capture, transform, enrich and share outcomes with all stakeholders. The most value-add activity lies with category owners to consistently scan, assess ROI and make informed decisions to initiate actions, instead of old school tedious data crunching. As a result, such spend insights often reveal hidden gems — unanticipated synergies that emerge nine out of ten times, surprising to category owners, their direct stakeholders and leadership teams. Our champion users call these moments of revelation ‘hidden gems.’ Let me illustrate this with a recent use case.

Use case: Becoming the go-to-person within procurement

We recently collaborated with a multinational enterprise that spans multiple brands worldwide. They had embarked on a holistic exploration of the company’s spend landscape, leveraging technology to expedite the process and discover all hidden gems. Within weeks, in collaboration with stakeholders across the brands and using Mithra’s taxonomy suggester module, they reconstructed an additional layer of taxonomy to capture global spend across all brands. This new layer provided the granularity needed to enhance and categorize spend transactions. The goal was achieved through simple extractions from multiple ERP systems, requiring no manual intervention.

This breakthrough empowered the entire team to visualize the complete supplier base across all brands and regions — a true milestone. This foundation was further fortified by Mithra’s analytics engine, ranking opportunities by size, probability of success and distribution across brands and regions. Consequently, the procurement team and the business jointly assessed and prioritized opportunities, spanning from easy wins, such as expanding master agreements and creating supplier hold lists, to strategic actions, such as supplier segmentation reviews and spend consolidation.

The new capability is now a repeatable process for the organization. Stakeholders can delve into spend taxonomy within their areas of expertise, suggesting improvements/changes to the category owners. The category team, in turn, can evaluate these suggestions against industry best practices, define scopes and implement accepted changes. Subsequently, the AI engine absorbs these alterations and generates outcomes within hours.

As a result, Procurement excellence team gained a lot of exposure and trust across their stakeholders and leadership team and became the go-to team/people for new initiatives. They formed a continuous cadence to review prioritized opportunities spread across diverse brands and entities and to work on business cases to showcase realized value to the business.

To learn more and provide feedback, I invite you to download our complimentary ebook and secure your spot at our taxonomy master class. Join us as we guide you through benchmarking and improving your spend lens, paving the way for procurement excellence.