Wouldn't it be nice if the whole process could be automated? Not so fast.
While automation would certainly make life much easier when it comes to supplier identification and classification in the spend analysis process, it doesn't necessarily mean accuracy. In addition to accuracy challenges, full spend analysis automation in many cases doesn't account for your company's unique spend profile. At a basic level, this means that how suppliers are classified during your spend analysis may be altered depending on the data sets used when creating the tool. Let's use IBM as an example. Suppose your company uses IBM for their consulting services, but because of rules hard-coded in your spend platform, they get automatically categorized as IT Hardware or Data Services (since your platform assumes that IBM sells predominantly hardware or data products).
If not reviewed and addressed, this could drastically affect the results of your spend analysis and following sourcing strategy. This could mean missed opportunity for major savings within your IT Hardware services by leaving money on the table in terms of negotiations, product upgrades, etc.
This is where semi-automation of the spend analysis process is crucial.
Source One recognizes the need for customization when it comes to automating the spend analysis process. The procurement leader's new spend analysis web-based tool, www.SpendConsultant.com, blends together manual classification with automation to deliver a spend analysis report that is both fast and actionable for clients. There's no one-size fits all solution to strategic sourcing and that begins at the spend analysis level.
In developing Spend Consultant tool, Source One's Data Scientist and Lead Architect James Patounas explains; "As the architect for any spend analysis software-based solution, my classification rules, likely some combination of statistical algorithms, distance metrics, decision trees, neural networks, must be based upon what I believe to be the most likely thing to occur within any spend dataset. Emphasis on the fact that I elected to use the word any and not the word your."
Source One's spend analysis as a service means automating the process backed by decades of strategic sourcing initiatives, but also leveraging Spend Analysis experts to review and ensure the results are truly reflective of where and how the organization spends.
In Part III of the Developing Spend Consultant Series, Source One's Data Scientist and Lead Architect for the spend analysis tool discusses exactly how semi-automation is crucial to the spend analysis process. Patounas explains the role data science plays in ensuring both speed and accuracy while delivering a product that enables procurement strategy.