A Hitchhiker’s Guide to e-Procurement: Analysis, Part I

Mostly Harmless, Part XVII

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Analysis is often defined as the process of inspecting, cleaning, transforming, and modelling data with the goal of highlighting useful information, suggesting conclusions, and supporting decision making. However, this misses the point — analysis is all about looking into data to get insight. Nothing more, nothing less. Everything else is a pre-cursor, post-decision, or just not relevant. It’s the Analysis, Stupid.

In e-Procurement, it’s all about what did the organization do, what did the organization not do, and what should the organization have done. Of course, this is a much harder question than it may seem to be on the surface. At a basic level, did the organizational buyers follow the processes? Were the purchases on contract? Did AP pay the correct amounts? Were taxes computed properly? Were owed moneys reclaimed?

However, these questions are just the starting point, not the end report. For on-contract purchases, were prices consistent? This is very important in office electronics purchases where rates are a percentage off of “best-price”. Considering electronics tend to depreciate about 2% to 3% month-over-month, over a year, prices should decrease. However, when many organizations plot pricing for a standardized computer purchase over the course of a year, they will find that prices stay relatively flat. For off-contract purchases, were prices reasonable compared to market index? How much did maverick spend cost the organization? Was any of the maverick spend justified? Did AP pay the approved (adjusted) amounts?

But the questions shouldn’t stop there. Were the spending patterns consistent? If spend on a particular category abruptly rises in a department where it was consistent year-over-year for the last three years, something is amiss. If claims for a particular employee are the same month over month when they usually follow a sinusoidal curve, something is wrong. If off-contract spend increases rapidly, something is very wrong.

Thus, directly or indirectly, a good e-Procurement system will support in-depth analysis of the process, spend, and results. This means that if the platform does not contain a true data analysis tool, it should support full export of all relevant data in a standard format that can be imported by such a tool for analysis. This is because, when all is said and done, the biggest savings will come from improving the procurement process itself. This requires insight, or lessons will never be learned.

Next Post: Analysis, Part I

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