Plus – Spend Matters https://spendmatters.com Fueling Procurement Transformation: News, Research, Community, Blog Fri, 23 Jun 2017 19:23:12 +0000 en-US hourly 1 46020013 Designing a Spend Category Taxonomy Properly is Harder Than You Think (Part 2: Go Deep) https://spendmatters.com/2017/06/19/designing-a-spend-category-taxonomy-properly-is-harder-than-you-think-part-2-go-deep/ https://spendmatters.com/2017/06/19/designing-a-spend-category-taxonomy-properly-is-harder-than-you-think-part-2-go-deep/#respond Tue, 20 Jun 2017 00:00:51 +0000 http://spendmatters.com/?p=49634

Categories: Spend Analysis, Spend Management

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We recently had a client ask us if we could offer specific guidelines or methodologies for creating a spend category taxonomy within the automotive and industrial markets. The question resulted in a discussion among a number of us with industry experience. And since we didn’t have any research already published on the topic, we thought we’d invest the time to document our findings. In this second installment of a two-part Spend Matters Plus research series, Chief Research Officer Pierre Mitchell explores how granular procurement should go in creating a spend taxonomy and concludes with practical tips for implementing a program.

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Designing a Spend Category Taxonomy Properly is Harder Than You Think (Part 1: Do This, Not That) https://spendmatters.com/2017/06/16/designing-a-spend-category-taxonomy-properly-is-harder-than-you-think-part-1-do-this-not-that/ https://spendmatters.com/2017/06/16/designing-a-spend-category-taxonomy-properly-is-harder-than-you-think-part-1-do-this-not-that/#respond Fri, 16 Jun 2017 13:00:28 +0000 http://spendmatters.com/?p=49434

Categories: Category Management, Spend Analysis, Spend Management

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We had a question from a client of ours about whether there were any guidelines or an overall methodology to coming up with a spend category taxonomy. It’s a simple question, but there isn’t a simple answer. So, we thought we’d offer some insights to help guide your efforts. But before we say what to do, there’s a quick recommendation on what not to do. In this first of a two-part Spend Matters Plus series, Chief Research Officer Pierre Mitchell explores how to think about creating a spend category taxonomy, pitfalls of incorrect approaches, and how to embrace an approach that cuts across categories and spend types.

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Business Process Management for Procurement: A Spectrum of Choices https://spendmatters.com/2017/06/09/business-process-management-bpm-for-procurement-a-spectrum-of-choices/ https://spendmatters.com/2017/06/09/business-process-management-bpm-for-procurement-a-spectrum-of-choices/#respond Fri, 09 Jun 2017 09:00:39 +0000 http://spendmatters.com/?p=48920

Categories: Procurement Research, Procurement Strategy & Planning, Technology

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BPM stands for business process management. If the business process is procurement (i.e., a collection of processes), then the concept is about managing procurement processes — including process design/definition, performance management (e.g., process outputs/KPIs, monitoring) and resource management. Of course, in the IT world, BPM has its own body of knowledge regarding the topic, focused mostly on “process workflow/integration on steroids.” This is the “system of process/interaction/engagement” that may sit on top of multiple systems of record (e.g., ERP, source-to-pay suites).

In this Spend Matters Plus article, we define BPM components and offer practical ways for applying BPM to procurement, keeping the topic on a business level and issuing both warnings and best practice tips for companies deploying or considering BPM technology adoption within the function. But how can you approach this topic without your eyes glazing over? Wikipedia does a good job explaining the concept, but we will try to define an evolution that procurement organizations can use to start doing IT-enabled BPM in a simple way, and then get more sophisticated.

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Freeing Yourself From the Chains of the DPO Stretch: An Empirical and Experiential Analysis https://spendmatters.com/2017/06/02/freeing-yourself-from-the-chains-of-the-dpo-stretch-an-empirical-and-experiential-analysis/ https://spendmatters.com/2017/06/02/freeing-yourself-from-the-chains-of-the-dpo-stretch-an-empirical-and-experiential-analysis/#respond Fri, 02 Jun 2017 09:00:05 +0000 http://spendmatters.com/?p=51915

Categories: Accounts Payable, Suppliers, Supply Chain Management

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Before on Spend Matters, I highlighted an analysis where, in 12 of 14 manufacturing industries I analyzed, I found negative correlations between Days Payable Outstanding (DPO) and enterprise performance (e.g., debt you may incur to raise cash to invest in high payback initiatives such as B2B trade financing where early payment discounts and/or supply chain finance programs are established). In this Spend Matters Plus article, I’ll dive into the industry details and also provide some additional insights based on some research that we conducted with the Institute for Supply Management (ISM).

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Commodity Management: Drilling into the Supply Chain and the Technology Landscape https://spendmatters.com/2017/06/01/commodity-management-drilling-supply-chain-technology-landscape/ https://spendmatters.com/2017/06/01/commodity-management-drilling-supply-chain-technology-landscape/#respond Thu, 01 Jun 2017 14:30:44 +0000 http://spendmatters.com/?p=17691

Categories: Commodities, Procurement Strategy & Planning, Sourcing, Supplier Management, Technology

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My colleague Jason Busch and I have written earlier about how, with the exception of a few top procurement organizations, procurement is failing to deploy the right sets of strategies, tools and tactics to bridge commodity management, sourcing and broader procurement activity.

In this Spend Matters Plus article, I want to dive into some of the details around commodity management and its relation to the broader supply chain, as well as the different solution approaches being used to tackle it. In a value-chain mega chart in the article (which basically follows a design > source > plan [supply] > deliver [inbound] process flow from left to right), I’ve outlined the various processes (brown rectangles) and some supporting solution types (blue ovals) for commodity management.

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Mega Spend Aggregation: 10 Ways to Supersize your Market Basket (Part 2) https://spendmatters.com/2017/05/26/mega-spend-aggregation-10-ways-supersize-market-basket-part-2/ https://spendmatters.com/2017/05/26/mega-spend-aggregation-10-ways-supersize-market-basket-part-2/#respond Fri, 26 May 2017 09:00:35 +0000 http://spendmatters.com/?p=36173

Categories: Spend Management, Supply Chain Management

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In Part 1 of our coverage on this topic, we started our discussion of various techniques to “supersize” your market basket, with an eye toward indirect spend. In this second half, we will now turn our attention to the supply chain for the remainder of the techniques.

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Procurement Metrics: Understanding the Economic Language of Value (Part 2) — Expenditures, Expenses and Financial Reporting (CapEx, COGS and G&A) https://spendmatters.com/2017/05/17/procurement-metrics-understanding-economic-language-value-part-2-expenditures-expenses-financial-reporting-capex-cogs-sga/ https://spendmatters.com/2017/05/17/procurement-metrics-understanding-economic-language-value-part-2-expenditures-expenses-financial-reporting-capex-cogs-sga/#respond Wed, 17 May 2017 09:00:35 +0000 http://spendmatters.com/?p=108580

Categories: Cost Management, Procurement Financials, Procurement Strategy & Planning, Savings Tracking

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In the first installment of this series, we discussed the term “spend” (the noun, not verb), in the context of supplier spending, in a fair amount of detail. We discussed addressable spend, and what's included and excluded for the purposes of spend visibility/management, but also for the purposes of using spend within procurement performance measurement and benchmarking. In this installment, we dive a little deeper in terms of comparing and contrasting spend to other terms, as mentioned in the title.

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Mega Spend Aggregation: 10 Ways to Supersize your Market Basket (Part 1) https://spendmatters.com/2017/05/16/mega-spend-aggregation-10-ways-supersize-market-basket/ https://spendmatters.com/2017/05/16/mega-spend-aggregation-10-ways-supersize-market-basket/#respond Tue, 16 May 2017 09:00:15 +0000 http://spendmatters.com/?p=36068

Categories: Category Management, Spend Management

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Most procurement organizations complain about diminishing savings on re-sourced categories – and rightly so. But rather than beating the same horse, why not hitch up more than one, and in new ways that you may not have considered? In this Plus piece, we’ll outline five of them, with the first one being "expand the 'lots' in your current market basket."

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Settling the “SCORe” with “Supply” at the Core: It’s time for Supply Management 2.0 https://spendmatters.com/2017/05/12/settling-the-score-with-supply-at-the-core-its-time-for-supply-management-2-0/ https://spendmatters.com/2017/05/12/settling-the-score-with-supply-at-the-core-its-time-for-supply-management-2-0/#respond Fri, 12 May 2017 09:00:15 +0000 http://spendmatters.com/?p=47527

Categories: Procurement Strategy & Planning, Supply Management

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As supply networks are becoming more complex, componentized, outsourced, and global (as well as faster, riskier and more regulated), the capability of managing supply (i.e., supply management to manage a network of supply) is promoted from a siloed set of functional process to an integrated strategic one. So, if you want to “orchestrate” it, whether you provide products, services (including information services), or both, you need to collaborate fluidly in a multitier and multilevel fashion that orchestrates both the process silos and the information silos. For lack of a better term, think of this as supply management 2.0. It basically expands the vision from a traditional procurement-led sourcing process, typically managed via ERP or standalone procurement applications, to a cross-functional and cross-enterprise “platform” for orchestration of all critical supply resources in the supply network (materials, capacity, logistics, capital, etc.) across the supply tiers.

In this Spend Matters Plus analysis, we argue that it’s time to flip the traditional paradigm of supply management from not just a new faceplate on the traditional purchasing function but also from the sourcing component of the “sourcing and procurement” moniker that many practitioners use. Having strategic procurement be merely about sourcing as a serial step in an end-to-end lifecycle is a mistake.

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Procurement Metrics: Understanding the Economic Language of Value (Part 1) — Spend https://spendmatters.com/2017/05/09/procurement-metrics-understanding-economic-language-value-part-1-spend/ https://spendmatters.com/2017/05/09/procurement-metrics-understanding-economic-language-value-part-1-spend/#respond Tue, 09 May 2017 09:00:06 +0000 http://spendmatters.com/?p=108254

Categories: Cost Management, Procurement Financials, Procurement Strategy & Planning, Savings Tracking

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One of the challenges that procurement faces is "speaking the same language" as finance, as well as the language of its stakeholders. A marketing department, for example, may use the term “investment” for its spending. Similarly, many procurement organizations categorize some of their added value in a category called “cost avoidance,” even though the term is not taught or recognized formally by the finance function.

Even within procurement, many terms are used inconsistently. Consider the term “addressable spend.” Is all spend addressable, as represented by cash disbursements going to external parties? Or is it supplier spending that is reasonably under the influence of procurement? If you say the latter, what defines “reasonable”?

The friction and misalignment common between various functions often results from stakeholders not having a basic understanding of terms that seem similar but yet can be very different. This problem is exacerbated when the stakes are high and you start getting measured and benchmarked on these metrics. To prevent this, procurement needs to be “business multilingual” and understand the variations of terminology so that it can best speak these languages and help the organization make the best decisions to create value.

This is what we’ll address in this analysis, with a focus on procurement and finance within the enterprise. Clearly defined terminology is the foundation from which higher-level concepts, performance metrics and benchmarks can be consistently understood — and improved.

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