A Review of "Spend Visibility: An Implementation Guide"

on Tuesday, January 17, 2012

Now that the holiday season is behind us, I am finally starting to get caught up on some industry publications that have hit the market recently.  Of course, "Managing Indirect Spend, Enhancing Profitability Through Strategic Sourcing" should be on everyone's reading list... but I digress.    No, the real thing I wanted to talk about today was the recent FREE whitepaper "Spend Visibility: An Implementation Guide (pdf)", compliments of Michael Lamoureux, PhD (the doctor) and Bernard Gunther; sponsored by Lexington Analytics.

So admittedly, this PDF whitepaper has been "sitting on my virtual desk" for over a month now, as it is a very comprehensive (in other words, long) 134 pages.  In fact, it very much has beginning makings of a decent book if they had just sought out a publisher, (like yours truly did recently). But once I finally committed to reading it, I found that it is actually a very worthwhile read that really deserves some attention outside of the doctor's blog.  In fact, even if you are short on time, there are enough quotes, examples and tips to keep you coming back to digest more.

From an elevator view, the report discusses a problem (or opportunity, depending on how you look at it) in which most strategic spend visibility initiatives really only are successful in driving short bursts of short-lived savings, or "quick saves".  The Executive Summary argues that most initiatives and visibility exercises only produce short term blips on the bottom line and are unsustainable in the long term.  We happen to agree with this at Source One, we are frequently told by some of our customers that they just sourced a category and that there are no savings available, yet we are able to produce both additional immediate savings as well as develop programs to help sustain or improve those savings beyond that first year of the contract.

The report starts with some strong citations from notable resources such as Aberdeen, IBM and Hackett Associates.  It basically outlines the strong savings opportunity (estimated up to 11%) that is on the table for just about any spend category.  It also details that by simply adding the process of reporting and viewing your spend carefully that an immediate savings can be found through areas such as incorrect item numbers, improper pricing, demand shift and maverick buying.  However, the report demonstrates graphically the rapid decline in sustainable savings after the low hanging fruit has been identified and the first year or so of compliance has been tracked and monitored.
The report then goes on to talk about taking things to the next level, which is of course, implementing a true strategic spend visibility and analysis plan.  This type of plan drills deeper than the standard top line reports that are seen in an early stage spend analysis or spend compliance report.  It dives deeper into areas such as fraud detection, regulatory compliance, "sacred cow" spending, part consolidation or rationalization, and more.  I am glad that the report included a reference to "sacred cow" spending in legal and marketing, though I would throw Human Resources into that bundle too.  By implementing a proper spend visibility program (with the proper resources and tools), you can virutally eliminate the short term blips in savings seen in the chart above and replace it with multiple repeatable savings successes as demonstrated in this funky chart below:

From here, the report begins to detail the basic ten-step process one should use to build a sustainable spend visibility program.  Now, I typically dislike business processes being defined in some sort of static "step" process, as I feel that every process is unique and needs to allow variation to ensure that process does not dictate outcome, but in this case, the steps are generic enough that they allow for variation themselves.   The authors outline the basic steps as follows:
  1. Get Executive Support
  2. Understand Existing Capabilities and Gaps
  3. Identify the Data Sources
  4. Identify the Raw Data
  5. Define the Schema
  6. Define the Starting Rules for Classification and Mapping
  7. Avoid the Common Tactical Traps
  8. Define the Cubes
  9. Analyze, Assess, Report, Decide
  10. Refresh, Repeat
I am particularly pleased to see that step one "Get Executive Support".  We wrote extensively on this topic in our book "Managing Indirect Spend" , talk about it right here on the StrategicSourceror.com and include it in every single sourcing project that Source One conducts with our customers.  As the author's point out, it's important for the organization as a whole to realized that spend visibility is not solely a procurement exercise, and the data (and support) cannot simply just come from AP data.  Total organization buy-in is required to maximize the adoption and obtain the savings from a spend visibility program.

At this point I have only talked about the introduction sections of the whitepaper report.  So what's in the rest of the report?  It is, in fact, one of the most comprehensive step-by-step resource guides I have seen for this industry.  It is complete with examples, suggestions, and tips to help you select (and implement) the best spend visibility guide for your organization.  Unlike other similar reports I have seen, this report is much more than a list of proprietary software requirements meant to exclude other vendors in an RFP process.  It documents specific examples and provides a "How To" guide on dealing with particular issues that are common in the implementation of a spend visibility program.

So who should be reading this report?  Well, if you are concerned about the bottom line for your company, you should be reading it. As stated earlier, an initiative as complex as this should not be something that is simply considered a "procurement initiative" even if it is driven by the procurement group.  If numbers, software and statistics aren't your thing, there is still plenty of content that talks about the challenges that a spend visibility program will face and where to find more savings opportunities. Simply put, I recommend that you take the time to review this report, its not your typical "salesy" whitepaper.

I'll wrap up this review with a simple quote that I found particularly true.  I don't even feel the need to add anything to it.
"Have a plan, track progress, and continually communicate success"
This cannot be understated.  The best way to garner continued funding and support is to measure and show progress against a plan and communicate that regularly.


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My compliments to the team at Sourcing Innovation, for once again providing some fantastic content without so much as even having to register.  There are no worries about getting spammed for the rest of eternity, so download the report now.

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