In our last post, we reviewed many of the core modules of S2P that can be successfully argued as “high priority” for implementation and came to the conclusion that the next module you get, and get started on (whether or not you integrate it right away or not) is Spend Analysis. This is because it not only helps an organization identify its biggest short term, near term, and long term opportunities, but also helps an organization identify which solutions its likely to get the most immediate value from.
For example, if the largest opportunities are:
- renegotiation and renewal with key strategic suppliers and/or supply base rationalization (NOT REDUCTION, but we’ll save that rant for when we get to Supplier Management)
- then you will need to get Supplier Management implemented promptly
- payment term and timeframe rationalization and/or standardized warranty and repair cost recovery (from suppliers)
- then you will need to get a good Contract Management solution implemented as fast as possible
- risk identification and mitigation
- then you will need to implement contract management with (third party) risk data integrations to help you address the risks in contracts
- tail-spend reductions
- then you will need to rapidly integrate catalogs from approved and preferred vendors into your eProcurement system, set rules limiting orders from non-approved suppliers without managerial overrides, and set budgets as well as enforce x-bids-and-a-buy spot-buys through the platform
- mid-to-high spend categories off contract
- then you will need an appropriate strategic sourcing solution
- overspend recovery from contracted suppliers
- then you will need an enhanced I2P solution that prevents additional overspend as well as an audit recovery tool that creates detailed overspend reports and tracks recovery from the supplier
- etc. etc. etc.
However, without a good spend analysis solution, it’s likely that you won’t identify any of your best opportunities. But with the right spend analysis tool, you will, in time, identify almost all of them.
How will you do that? Using a combination of out of the box reports, analytics, and insights and deep, hunch-based, what-if analysis by your expert sourcers and data analysts. And what capabilities does the tool need to have for you to do this? Keep your eyes peeled for Part 10.