Sievo – procurement revolutionaries or the Finnish inquisition?

We talked here about the difficulty of measuring real procurement performance; here's the promised follow-up.

After  I saw a piece about Sievo in Supply Management the other week, I thought I’d call them as it was not a firm I'd come across before.  Some background first;  Sievo was founded in 2003 in Finland, have around 25 staff and 30 clients, generally blue-chip private sector firms in the UK, Germany, Netherlands and Scandinavia. They’ve ‘been profitable from the start’ and are owned by the founders (Sammeli Sammalkorpi and Matti Sillanpää, ex Helsinki University) and employees. I had my introductory chat with their MD, Fabrice Saporito (not a Finnish name, as you may have spotted – he’s based in Paris).

They’re another supply chain software firm of Scandinavian origin (see Basware, Trade Extensions etc.)   But their offering in the field of “Procurement Performance Management” as they describe it is, as far as I have seen, pretty much unique (subject to Jason's comment below)  – please let me know if anyone out there thinks I’m wrong on that!

They describe their solution in four modules;
• Spend visibility
• Budgeting & forecasting
• Savings programme management
• ‘Controlling’ compliance component

The software has a strong focus on helping to work through from analysis into real benefits realisation - a weakness in many procurement functions in my experience. They start with a conventional spend analytics approach, but then add a number of dimensions to give ‘greater horizontal depth’, and bring more of a ‘future component’ to the spend mapping. This gives an element of budgeting and forecasting into the picture, and then Sievo overlay specific market / category knowledge and tracking into the picture, which is where things get interesting.

Jason Busch tells me that ICG Commerce, the procurement BPO provider, has a similar focus on savings realization and they’ve created some useful technology to track, measure and implement savings opportunities outside of just initial opportunity identification in spend analysis.  As with what Sievo is proposing, this is a key missing link between many spend visibility, e-sourcing and contract management technology platforms (not to mention a process gap between procurement, finance and business spend owners).

What does all this mean in practical terms? Well, if I understand it correctly, it gives me the opportunity as the CPO (or CFO) to analyse then track spend on a category basis  (let’s say packaging), set up and manage a savings / value release programme, and predict the effect of future potential category activities (e.g. specification change) or changes outside my control (e.g. currency).

Then, it enables me to identify the drivers behind overall cost changes. So let’s take the case where the category manager claims a 7% ‘saving’ for the category on a year on year basis. As the CPO, typically (if you’re lucky), that might be explained with a brief note, saying “savings from more effective specification and negotiated discounts have more than offset volume increase.”

The analysis from Sievo in such a case might actually say this;

  • Change in demand (usage reduction): + 3% (i.e. we used 3% more volume)
  • Change in specification: -10% (i.e. we switched to a lower spec packaging film which should be this much cheaper)
  • Currency movement: - 5% (favourable)
  • Market movement: -3% (Sievo evidence shows market prices falling generally by this amount)

Now taking all this together, if I’ve worked this out correctly, we should have seen out total spend in the category falling by 14.6%.

So if the actual outcome is merely a 7% saving, then the real commercial performance has been poor to say the least, and I need to have a word with my category manager! Of course, she may have driven the specification change, for which she deserves credit, but more benefit overall should have been gained in this case.

It could work the other way as well – many of us will have been in a situation where I’m paying 20% more than last year but I know I’ve done a good job in a very tough environment.

We described the other day why sales people in general have a tougher life than procurement , because of the lack of clear measurement. If Sievo really have cracked this, the implications could be quite profound. I’m not sure all procurement people would welcome it, but it might allow organisations to genuinely see where ‘savings’ or cost pressures are coming from, and to assess just how good their procurement performance really is.

Interesting – and we hope to feature a more in depth analysis of Sievo before too long.

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