Surprise, Surprise: Procurement Has Yet to Solve Its Data Challenges

Posted: 03/26/2021 - 09:00
Procurement Has Yet to Solve Its Data Challenges

Surprise, Surprise: Procurement Has Yet to Solve Its Data Challenges

LogicSource and Sourcing Industry Group recently conducted a joint procurement technology survey. The results revealed some consistent, yet alarming, trends in procurement spend analytics. In short, responses made it apparent that procurement organizations at-large have yet to solve their spend data quality challenges.

Three key findings from the survey indicate the market’s need for more expertise and ongoing data services as it relates to procurement spend analytics:

●      66% of respondents know that they need to improve spend data quality

●      34% of respondents cite data is not actionable, accurate or up to date

●      28% of respondents have no spend analytics tools or processes

Seize the Opportunity to Lead Strategically

Now is an opportune time for procurement leaders to address spend data quality issues. After the extraordinary work of procurement teams throughout the pandemic, the positive organization-wide sentiment should allow procurement leaders to strategically transform their analytics categorization, normalization and enrichment. Business stakeholders expect clean, accurate and current spend analysis. By taking the time to understand the necessary changes and improvements to your spend management process and related tools, you can empower your team to achieve an even higher level of data quality and performance.

“Spend analytics will have a critical role not only in helping leaders monitor and improve cash and cost, but also in transforming and improving existing practices to create a more resilient future.” - The role of spend analytics in the next normal, McKinsey & Company, August 2020

The above quote drives home the point that new finance mandates will oblige procurement organizations to take responsibility for implementing formal spend analytics initiatives and a sustainable process to maintain the data accuracy, quality and normalization on a monthly basis. In the past, this type of program was deemed “nice-to-have” feature and has now been transformed into a “must-have” feature. Consequently, procurement has found itself scrambling to find the resources to either build internal capability and/or purchase spend analytics technology.

In the same McKinsey report noted above, it’s stressed that procurement leaders must improve and transform their internal structures to support quality spend data management, so that they can be agile in times of crisis. Moreover, these same leaders are struggling to keep up with the increased demands of delivering more value quicker, supporting supply-chain sustainability, implementing value delivery levers that are specific to category, company and sector content, while managing their operations virtually. As a result, implementing a monthly “ingest to publish” process to maintain accurate and actionable spend data – as well as enriching spend analytics technology with additional dimensions – needs to be a top-five priority.

Partner with Experts

Many procurement leaders are strapped when it comes to building internal spend management solutions and typically do not have the time, expertise or budget. Likewise, procurement leaders can’t afford to divest their already-limited resources to another project that will need to be rigorously maintained and requires more overhead.

The “buy” option isn’t much better. Spend cubes are not a panacea to poor quality and stale spend data. In fact, 53% of procurement leaders found their analytics software to be expensive to support a solid business case. 45% of those leaders also agreed that there is a lack of internal expertise to manage the process and the reporting. 

The reality is, spend analytics technologies are never going to live up to hype or business case if it is not delivered with expert data services, which vigilantly, on a monthly basis, ensures the integrity and accuracy of the data has been put through a tight quality assurance process.

The change required to transform how you manage your spend data starts at a micro level. The first step involves a rigorous data cleanup to create the right categorization, normalization and business rules. Second is deciding on what data you want to track for enrichment opportunities, such as chart of accounts, contract information and supplier parent/child relationships to name a few. Third, partner with spend analysis experts who can quickly support you on this journey and execute the monthly process to maintain accurate, actionable and timely reporting.

Other key questions procurement leaders need to ask include:

●      Do we have transparency in our spending beyond supplier-level data?

●      Is our data categorization, normalization, and enrichment mature enough to support our team's ability to trust the spend data and discover strategic sourcing projects?

●      Can we easily track and report on accurate supplier parent-child relationships?

●      Can you enrich your data to track your supplier diversity partners to ensure you are meeting and/or exceeding your targeted goals?

All procurement value creation must start and end with actionable and highly accurate spend data that delivers insights to elevate your team’s ability to identify new savings and spending reduction opportunities on an ongoing basis.

As we find our way out of the pandemic, the first half of 2021 is a fortuitous time to focus on and invest in building a mature spend analytics function. It will play a critical role not only in helping the business manage and improve cash and spending, but it will also empower procurement to improve easy access to actionable, accurate, and timely supplier recommendations and decision-making


About The Author

Sam Vail's picture
Sam is a Managing Partner at LogicSource accountable for the growth and profitability for the company’s sourcing and procurement services enabled technology line of business – OneMarket®. Sam has over 25 years of experience in senior leadership positions in professional services, private equity, and information technology businesses.
Sam was previously a Partner at ISG the global leader for sourcing consulting, advisory, data and governance where he led the practice dedicated to working with Private Equity firms and their portfolio companies.  Before ISG, Sam spent ten years in private equity as an Operating Partner at Kidd and Company and Spencer Trask focused on top line growth and operating value improvement for over twenty middle market businesses.  In addition, Sam worked at Gartner Group for nine years where he was Group Vice President and built Gartner’s Worldwide Strategic Account organization making significant contributions to this hyper-growth period in the company’s history as the IT research and advisory global leader.