Category Archives: Best Practices

There’s Still No Spend Analysis Without the Slice ‘N’ Dice


SI originally ran this post 10, yes ten, years ago today, and nothing has changed. Regardless of how fancy that drill-down dashboard is, how many pre-canned reports come with the system, or how many sub-views you can create, if it’s still off of 1, that’s one, cube, it’s still limited in the value you will get. Moreover, this post is especially relevant because it reminds us of how BIQ changed the spend analysis game and that the individuals that spearheaded the company are game changers. This is particularly relevant because Eric Strovink, the founder and the person that has now changed the spend analysis game twice (first at Zeborg, now part of [IBM] Emptoris, before BIQ) is going to be launching a new analytics company this year, and chances are it won’t just be the same-old same-old rebranded Tableau or QlikView solution).

When I was in Boston, I was lucky enough to spend the better part of the day with Eric Strovink of BIQ, and have a few extended conversations with individuals at some of the local consulting firms that specialize in sourcing, and am now more than convinced that any tool that mandates a single cube, or makes it difficult to change the cube, is not a spend analysis tool, merely a spend data warehouse with built in canned reporting (and, if you’re really lucky, limited ad-hoc capabilities).

Not that there’s anything wrong with a centralized spend warehouse with a consistent view of your total spend, especially one that integrates multiple internal and external data sources and allows you to drill down and understand your spend at a detailed level. Of all the e-Sourcing software tools, it is the one most likely to make your CFO do backflips, especially if it has good reporting (and this is a big if – not all spend analysis tools on the market do), since it makes it really easy for the CFO to tell the CEO where the money is going and comply with all those pesky reporting requirements.

However, the value of such a tool is quite limited to you as a purchasing agent. Now, it’s true that the first time you’ll use it you’ll save big-time, especially if it’s the first time you have visibility into the majority of your spend, but the reality is that this is the only time you’ll see such significant savings. After you’ve identified all of the low hanging fruit identified by the single view provided to you by the system, analyzed each instance of over-spending, and taken corrective actions, you’ll find that you’ll be unable to identify additional savings and the system will simply function as a glorified data warehouse that you only use once a quarter to create those reports for your CFO and check that your teammates our buying off the negotiated contracts – something that you could do almost as well with your existing ERP system and a significantly cheaper Business Intelligence / OLAP tool like (SAP) Business Objects or (IBM) COGNOS and some grunt work.

Remember, I’m not saying that traditional spend analysis systems like those provided by e-Sourcing providers like (SAP Ariba) Procuri and (IBM) Emptoris are not without value – if you do not have a good, integrated, data warehouse that integrates your various accounting, purchasing, and inventory systems to provide you a single view of your spend or a good reporting system to produce all of the reports your CFO needs, then you’ll find these systems very valuable. However, it’s important that you understand that the primary value of these systems is in the total spend visibility they provide from a financial viewpoint, not the spend analysis capability you really require to identify potential overspending and cut-costs, because you’ll only be able to do this once – thanks to the single organizational view they are built on. (In other words, you’ll save big when you fist implement the system but future savings will be limited to your capability to quickly catch and stop maverick spend.) So, if you need a system to consolidate your spend data, produce the tedious reports required by all of the new financial reporting requirements, and give you some basic across-the-board spend visibility, or, more importantly, you need a spend data warehouse that integrates with the rest of your e-Sourcing suite, be sure to check these systems out – but understand what they are really worth to you before you sign the check.

In order to help you understand where these systems fail in true spend-analysis, why you need to be able to dynamically create multiple cubes on the fly which support dynamic dimensions, meta-aggregation, cross-dimensional roll-ups, and even federated data sets, I’m happy to inform you that Eric Strovink has agreed to co-author a series of posts outlining what real spend analysis is, how it differs from basic spend visibility, what it does for you, and why you need to get there.


Eric Strovink was actually kind enough to contribute two insightful series to Sourcing Innovation. Here are the links for your reference.

I: The Value Curve
II: The Psychology of Analysis
III: Common Sense Cleansing
IV: Defining “Analysis”
V: New Horizons I
VI: New Horizons II

I: It’s the Analysis, Stupid
II: Why Data Analysis is Avoided
III: Crosstabs Aren’t Analysis
IV: User-Defined Measures, Part I
V: User-Defined Measures, Part II

Process Transformation: How Do You Get it Right? Part VI

Two weeks ago, we talked about how to drive technological advances, because it’s one of the critical three T’s of Supply Management success (with the other two being talent and transition to better processes). But technological advancement is not enough if your processes, to be blunt, outright suck harder than a Hoover. That’s why, as the Big C’s say, you will need to achieve some “process transformation” if you ever want to become best in class (and why each of these Big C’s claim to have the best advice [for a price] to help you along your journey).

However, as we outlined in detail in our first post last week, it’s very difficult to tell if any of the Big C’s have WHAT you need when, for example, the difference between the four-step framework promoted by one of these C’s (PwC, although SI could have picked any of them … and we do seriously mean any one of them) and four of the first eight random mission statements generated by the mission statement generator at cmorse.org (which is almost as good as the now defunct Dilbert mission statement generator) is pretty hard to discern!

Then, as outlined in our second post, we made it clear that what you really need is a simple process that starts with understanding where you are now, moves on to figuring out where you want to be, creates a plan to get there, and, finally, executes the plan. Then we began our series in earnest by outlining what is involved in understanding where you are now (which is more involved than you might think), which often doesn’t require a team of 10K-a-day consultants, continued on by specifying how you go about figuring out where you want to be (which is often more difficult than one may think), discussed how you how you put together the plan, and then, finally, in our last post focussed on execution — which is always harder than you think.

So where does this leave us? Frankly, with a focus on Adoption, Adoption, Adoption, Adoption. Just like Ballmer used to go hysterical for developers (even though anyone familiar with Brooks’ work on software engineering and The Mythical Man-Month knows that sometimes less is more, especially when you have top talent), you need to get hystical about adoption. If the software is only used by 25% of the people, and even these people aren’t using it all the time, it’s not worth whatever deal you got on it.

And adoption needs to start day one. The users who need to use it everyday need to be involved in the plan from inception through execution. From day one, the cross-functional team needs to include a representative of every user group who will make sure key processes are supported, usability is high, and concerns are met — and if necessary, ensure you sacrifice the few “power features” that only a few will use in favour of the “adoption features” that will ensure a mass roll-out. (Remember, for highly specialized needs, there’s always a point-based best-of-breed solution out there you can get for the power users. And sometimes the ROI from getting two solutions [even at twice the cost] outweighs the ROI from a single solution. Remember, ROI is only X/4 with a 25% adoption rate. With 100% adoption, it’s X, so even if you have to pay 2X for 2 solutions … you still get twice the return.)

So focus on adoption during your process transformation efforts and you will truly achieve process transformation and the results you desire. Otherwise …

Process Transformation: How Do You Get it Right? Part V

Two weeks ago, we talked about how to drive technological advances, because it’s one of the critical three T’s of Supply Management success (with the other two being talent and transition to better processes). But technological advancement is not enough if your processes, to be blunt, outright suck. That’s why, as the Big C’s say, you will need to achieve some “process transformation” if you ever want to become best in class (and why each of these Big C’s claim to have the best advice [for a price] to help you along your journey).

However, as we outlined in detail in our first post last week, it’s very difficult to tell if any of the Big C’s have WHAT you need when, for example, the difference between the four-step framework promoted by one of these C’s (PwC, although SI could have picked any of them … and we mean any one of them) and four of the first eight random mission statements generated by the mission statement generator at cmorse.org (which is almost as good as the now defunct Dilbert mission statement generator) is pretty hard to discern!

Then, as outlined in our second post, we made it clear that what you really need is a simple process that starts with understanding where you are now, moves on to figuring out where you want to be, creates a plan to get there, and, finally, executes the plan. Then we began our series in earnest by outlining what is involved in understanding where you are now (which is more involved than you might think), which often doesn’t require a team of 10K a day consultants, continued on by specifying how you go about figuring out where you want to be (which is often more difficult than one may think), and, in our last post, dove into how you put together the plan.

But a plan is just a plan is just a plan until it is executed.

And execution isn’t just throwing the plan over the wall and saying “Go”.

In order for plan to be successfully executed their has to be focus, alignment, and drive – not just in the plan, but in the talent. Not only should the plan be focussed on achieving the goals of closing the gaps but so should the talent. Not only should the goals of the plan be aligned with the overall goals and objectives and strategy of the business, but so should the talent. And, most importantly, the talent should be driven to achieve the focus and alignment in all that they do.

But this, as any change management manager will tell you, is much easier said than done. You will meet resistance every step of the way. It will be a slow slog and you will have to get your champions to convince the talent leaders to get the talent in line. You will have to watch for process and platform bypass. Etc. Etc. Etc.

Why? Because the plan, and more importantly the people executing the plan, are always focussing on the process and platform first, and not the people. People who are continually overworked, underpaid, continually pressured, and micromanaged by at least one pointy-haired boss (to the point that all you need to do to get them to quit is promise more boss time).

The key to execution is the talent, and the key to success is fostering a drive in the talent to implement the plan and achieve that success. This means that you have to go back to the WHAT, listen to WHAT they said they needed, and start by giving them all of the capabilities in the process or platform that they wanted FIRST. Now, sometimes you will have to implement technology X before you can implement feature Y, and that’s okay, but the features and functions desired by the team members who will be using the platform every day have to come before the fancy reporting or oversight functions the CXOs, who might use it once a week or once a month, want. Focus in on anything that will make someone’s life easier, and start there. That’s how you get interest, drive, and adoption — which is the ultimate key to process and platform success. (There’s a reason that even among organizations that utilization is a mere 25% even among organizations that have adopted modern Supply Management platforms, and it is partly because they focussed on feature / function / executive wants / price and not every day user requirements in selection, and went about implementing the feature / function / executive wants first.)

In other words, successful execution is all about focussing on the needs of the talent, and helping them achieve success. If they see value, they will make the project successful. It really is almost that simple. (There will always be a few curmudgeons, but most people will migrate to anything that makes their job easier. It’s psychology — everyone wants to work smarter, not harder, so take advantage of that and give them something to makes their lives more productive and easier.)

And you don’t need a 5K/day consultant to tell you this — you just got this advice for free. (And if your old-school boss won’t trust free advice, feel free to send SI a $5K cheque or wire (USD) and we will happily send this series to you in a fancy PDF with your logo so you can make the boss happy. Contact the doctor for payment details.)

Process Transformation: How Do You Get it Right? Part IV

Two weeks ago, we talked about how to drive technological advances, because it’s one of the critical three T’s of Supply Management success (with the other two being talent and transition to better processes). But technological advancement is not enough if your processes, to be frank, suck. That’s why, as the Big C’s say, you will need to achieve some “process transformation” if you ever want to become best in class (and why each of these claim to have the best advice [for a price] to help you along your journey).

However, as we outlined in detail in our first post last week, it’s very difficult to tell if any of the Big C’s have WHAT you need when, for example, the difference between the four-step framework promoted by one of these C’s (PwC, although SI could have picked any of them) and four of the first eight random mission statements generated by the mission statement generator at cmorse.org (which is almost as good as the now defunct Dilbert mission statement generator) is pretty hard to discern!

Then, as outlined in our second post, we made it clear that what you really need is a simple process that starts with understanding where you are now, moves on to figuring out where you want to be, then creates a plan to get there, and, finally, executes the plan. Then we began our series in earnest by outlining what is involved in understanding where you are now (which is more involved than you might think), which often doesn’t require a team of 10K a day consultants, and continued on by specifying how you go about figuring out where you want to be (which is often more difficult than one may think).

The next step in our simple process is creating a plan to get there. This can be very, very complicated, or very straightforward. We will focus on the straightforward way, and this can be summarized in two words. Gap Analysis.

A gap analysis looks at where you are now, where you want to be, figures out the gap, and comes up with a sequence of steps to get there.

For example, we will assume that the gap analysis determines that, right now, only 20% of invoices are 100% processed and the goal is a best in class rate of 90% of invoices being best in class processed within 12 months. It also determines that the primary method of achieving this success has been identified as technological transformation as well as process transformation, with the goal of receiving 95% of invoices electronically within 12 months and having an automated review and verification rate of 95% within that same timeframe.

The gap analysis would determine, based upon a review of case studies, white papers, current technology, that the organization has to:

  • implement a new platform that supports XML, EDI, and PO-flip
  • enable the suppliers that supply 80% of the products and services within 9 months
  • implement the rules to match an invoice to PO
  • implement the rules that verify units and amounts match (within tolerance) and that key information (SKUs, purchase order ids, sender address info, delivery location info, etc.)
  • … and the rules that bounce back an unmatched invoice to a supplier with a description of the problems and resubmission procedure; this will take care of 90% of issues without manual intervention

Then it will review these steps and realize that it needs to:

  • insure the vendor provides adequate XML and EDI descriptions and (API) submission rules for suppliers through review and testing
  • identify the top suppliers and break them into waves (a handful of key, a few dozen heavyweight, the rest) and onboard them in those waves
  • define rules to match an invoice to a PO if there is no PO id, based on time range, supplied products, locations, etc. and then test the rules
  • define all required fields and tolerances
  • define the responses when there is an issue

And that testing, supplier on-boarding, and rules definition and testing will take time. That time will be estimated with an appropriately sized team, and a plan will be made.

And then that plan will need to be put into action. But that is the subject of the next part of our series.

Process Transformation: How Do You Get it Right? Part III

We spent last week talking about how we drive technological advances, because it’s one of the critical three T’s of Supply Management success, with the other two being talent and transition to better processes. The big C’s call this “process transformation” and each of these (including, but not limited to PwC, Accenture, Hackett [Archstone], etc.) claims to have the best advice [for a price] to help you along your best in class journey.

However, as we outlined in our first post, it’s hard to tell if any of the Big C’s have WHAT you need when, for example, the difference between the four-step framework promoted by one of these C’s (PwC) and four of the first eight random mission statements generated by the mission statement generator at cmorse.org is pretty hard to discern.

Then, as we outlined in our second post, we made it clear that what you really need is a simple process that starts with understanding where you are now, moves on to figuring out where you want to be, then creates a plan to get there and, finally, executes it. We started by outlining what is involved in understanding where you are now, which is more involved than you might think, but not so involved that you can’t manage it without a team of 10K a day consultants.

The next step is to figure out where you want to be. This will involve:

  • highlighting the process (steps) that are the most critical for improvement
  • outlining efficiency and effectiveness goals (to get your procurement value engine running smooth)
  • determining why the options you select are better than others and making the business case

Where You Want To Be

In order to determine the process (steps) that are the most critical for improvement, you will need to balance the processes where there are the most opportunities for improvement (and increased efficiency and/or effectiveness), with where the is the most vocal outcry for improvement, and where there is the most process avoidance. Sometimes you will have to sacrifice what looks like a great ROI on paper for a small improvement that will actually enable a great ROI down the road. An improvement will only deliver an ROI IF it is used by the people who need to use it. If those people are avoiding, or will continue to avoid, the platform because they find it unusable, the process improvements will be for not.

In order to outline efficiency and effectiveness goals (to get your procurement value engine running smooth), you need to look at where you are now, where the best in class are, and what is a reasonable goal for your organization. A journey to best in class begins with one step, and, more specifically, one percentage increase on the ROI scale at a time. For example, if your average invoice processing time is 45 days, and your best-in-class peers have an average processing time of 15 days, expecting to go from 45 to 15 in 90 days, even with a best-in-class cloud solution, might not be possible. The goal should first be a reduction to 30 days, especially since it will take a long time to get suppliers on-boarded, AP staff trained, and approvers comfortable with the new process. Then a stage 2 goal can be set once the organization determines how long it took to get down to 30 days and what the eventual end goal is likely to be.

Finally, you need a good, believable business case, because everyone is going to want an explanation as to why their request for process or platform improvement isn’t first on the list. While there should be an ROI, the whole case should not revolve around the ROI because support for organizational initiatives, solutions for issues that cause people to avoid the process, and aspects that can increase adoption are just as important.

Then, once you have figured out where you want to be, you can move on to the next step of creating a plan to get there. That will be the subject of our next post.