Procurement over the years has evolved from merely being transactional (being cost focused) to being strategic in its approach. Technology has played a major force in the transformation and rise of the procurement function. Procurement professionals have leveraged technology in numerous areas of procurement to ensure it delivers value to the bottom line and at the same time add value to organizational processes.
This post is the first among the 5 part series that will provide an overview of the 5 key strategic imperatives focused by high performing businesses to excel in today’s competitive business environment. The first part of the series looks into the area of ‘visibility into existing spend portfolio’.
A typical procurement organization is involved in the sourcing of a lot of materials – direct & indirect purchases. As the organization grows and spreads so does its purchases and the number of suppliers from whom the purchases are made. As the volume increases, it increasingly becomes difficult to monitor each and every purchases happening within an organization. The data for the purchases made are most often spread across the organization in different nomenclature in different legacy systems across different business units which have minimum interconnectivity. This makes it difficult for organizations to access the data leave alone analysing it.
The first step for companies to increase visibility into their spend is to establish a common nomenclature for the direct & indirect purchases made by the organization. Data classification should be granular and then combined with an analytics tool that not only reads the data and gives you a full picture of your spend but also provides what if analysis and suggest areas where savings opportunities can be mined.
For data cleansing a pre-requisite is an automated classification tool that makes your data comprehensible. This classification tool needs to be able to handle data that is multi-lingual, contains misspelled words, cryptic data and even abbreviations. Adopting a uniform code like UNSPSC can be a very good start to making your data actionable. Organizations can choose from various taxonomy schemas available (UNSPSC, eClass etc) based on their business/industry requirements. Organizations can also look towards customized taxonomy based on their unique business needs.
A clean, unduplicated and classified data will enable procurement professionals to,
- Extract spend data from multiple internal systems
- Cleanse & Classify spend data
- Enrich, Analyze & Report spend data
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