A few weeks ago, the Supply Chain Management Review published a short piece on
Procurement’s Data Problem that noted recent surveys from Globality and SpendHQ had some appalling statistics, including the findings that 82% of leaders are not managing indirect spend well, 79% don’t have dedicated software to track and manage performance, and 75% doubted the accuracy of the data they present. What The Hell? It’s not 2003 anymore. It’s 2023. And this is easy stuff. Get it together people!

The data problem is easy. (At least at a basic level.)

• Have a process that forces ALL spend through the e-Pro/AP system.
• Make sure there are POs (Purchase Orders) for everything that’s not a recurring invoice such as a utility or lease payment, and VPOs (Virtual Purchase Orders) for these recurring invoices that define either agreed to amounts, hourly/usage rates, or expected ranges (that can then be corrected to the actual amount when the monthly bill arrives).
• Make sure all invoices are imported into the e-Pro/AP system before any payment is made.
• Make sure they match the PO before they are paid.
• Make sure all payments are captured in the e-Pro/AP system.

Now you have an accurate, trustworthy, record of every single transaction from order, through approval, to payment. Now you have good spend data that you can trust. To extract insight and/or create reports, just use a good spend analysis tool. Basic, accurate, trustworthy data is easy.

Baseline Performance Management ain’t hard either.

Spend performance is just analyzing the average price per unit paid over time. If you don’t have a a performance management (sub) module, you can literally do this with a spend analysis tool where you create a report for every sourcing project you do that tracks spend over time against a baseline from which savings/cost avoidance over time can be created. Associate each with a user, a department, and a category and you can easily create performance reports by user or department or category.

Managing Indirect Spend is straight forward as well.

1. Use your spend analysis tool to identify categories and spend level.
2. For high spend categories, do strategic sourcing projects that are (multi-round) (hybrid) RFX and/or auctions.
3. For low spend categories, do 3-bids-and-a-buy / approved catalog Procurements (through your e-Pro tool).

Sure, you might not realize the maximum opportunity, but this simple recipe will likely capture 90%, often without significant effort, and you go from losing 15% or more on the tail of the indirect spend and 5% to 15% on the higher volume indirect spend, to only losing a few points on the higher volume and less than five points on the tail. It’s simple. It works. It only needs an e-Pro tool and a cheap RFX/Auction tool, and there are examples of each of these tools that support mid-size enterprises with unlimited use for less than 2K a month. There’s just no excuse not to have the basic tools and not to use them. (As for spend analysis, Spendata Enterprise starts at 1,200 a month! And Anydata Solutions has mid-market pricing under 2,000/month as well! [Both require minimum commitments.])

Less than 60K solves these problems. That’s less than a fully burdened junior buyer. There’s no excuse for this situation anymore. Simply none. So get it together please.