Daily Archives: September 8, 2014

If I Succeeded in Destroying Dashboards, How Else Would I Improve Spend Analysis.

The smart alecks are correct — technically destroying dashboards is not adding anything to spend analysis so I didn’t actually provide a way to improve spend analysis technology, just the results you get from using it.

So if I succeeded and dashboards bit the dust, what would I do? (Besides banning integration points for report writers for all OLAP-based spend analysis products?*) Good question. Especially since there’s about a half dozen logical next steps.

Three things that would be useful if you had a true spend analysis product like Opera’s BIQ would be to:

  • Integrate Easy Should-Cost Modelling CapabilityThis way you can define a cost breakdown for a product or service you are looking to source and have the tool automatically generate an expected cost based upon current data, as well as a price-range, with confidence, based upon low, average, and high prices paid for the raw materials, energy, labour, etc. (provided that the should-cost model permitted base-cost definitions for any cost components you weren’t buying that were bought entirely by your supplier)
  • Optimized Awards Based on Historical Data and Business RulesYou don’t have to send out an RFX to get base market pricing if you are already buying a product, it’s in your transaction store. Nor do you have to run a complex event to determine the lowest cost providers for a market basket. Moreover, if you are buying commodity products and services with list prices, and all your suppliers do is give you a discount of X% for a guaranteed award, you don’t really need optimization to determine the lowest cost as it’s just a simple formula against current pricing. And if your only business rule is 2 or 3 way split, it’s just the 2 or 3 lowest cost suppliers with the appropriate risk mitigation. In this situation, it would be easy for spend analysis tools to build in some simple optimization capability to tell you your lowest cost buy, and if it’s close to your should-cost model, you can just cut a contract without going through a time-consuming sourcing event.
  • True Federation across Related Data SetsMost spend analysis tools are only capable of working on one cube built on one data classification at a time. This means that even though a user can pick the drill dimension order, only one set of data can be viewed at one time. But sometimes you want to drill into greater detail (such as who requisitioned all those widgets from the wonky supplier), and that’s not in the transaction file — so you need another cube with more detail on the invoice (history). Then you drill in on the augmented AP (cube) data until you get to the invoices associated with the supplier, switch over to the new cube and drill down to the line items of interest and retrieve the requisitioners. Another situation is where you are getting a lot of warranty returns, and you want to figure out what batches the returned items are in so you can determine whether or not the batches were bad and it will be cheaper to do a mass replacement (by just putting out a recall) than dealing with one breakdown at a time. In this case, you need to drill into the warranty cube and then branch over into the invoice cube to get the batch numbers associated with the appropriate goods receipts that are associated with the invoice.

These are just a few things that can be done, and all would simplify the life of an analyst. More to come at a later time but first, what would you do?

* If you don’t know why, you don’t know your spend analysis product limitations!