5 Steps to Leverage Data to Transform Procurement
VSP Head of Global Corporate Services Greg Tennyson is a champion of analytics as the foundation for running a modern sourcing and procurement teams. Greg was the CPO at Oracle for 10 years, CPO at Salesforce, and now CPO/Head of Global Corporate Services at VSP. Greg is credited for training and mentoring many of the most progressive procurement leaders on the West Coast. Greg is a hall of fame member of the Sourcing Industry Group and the procurement team at VSP was recently recognized by the Everest Group as one of the most innovating and effective procurement teams in the industry. In summary, Greg knows what he is talking about, and now is getting more out of his spend data for procurement.
Recently Greg published a thought piece called “Spend Visualization” as a wake-up call for the procurement industry to the importance of data in making strategic decisions and his recommendation on how to aggregate, cleanse, analyze and train your team on using decisions to drive insights and actions. Greg calls out key trends that the sourcing and procurement industry must recognize in order to truly achieve data-driven business results:
5 Steps to Leverage Data to Transform Procurement:
- Procurement needs to become a trusted advisor to the Finance Team and Business Units
- Actionable data is critical to driving insights and making the best decisions across the business
- Data must be always on and interconnected
- Partner with a third party data expert
- Empower your team to leverage insights
Procurement Must Be a Trusted Advisor
Greg and his team at VSP have done a fantastic job partnering with business leader to drive a spend transformation at VSP. A spend transformation requires procurement moving from being viewed as process heavy gate-keepers to true business drivers helping BU leaders achieve their goals and objectives on budget. VSP drove a cultural transformation and built a great team that is well respected across the business. Greg’s data-driven procurement evolution is well documented here and is a great case study for anyone interested in learning how to increase the influence of the procurement team.
The key is that procurement can no longer simply be the “spend police.” Procurement must add true value across the business. Gartner has highlighted this shift from “savings to speed” in their most recent article on the evolution of the procurement team. https://www.gartner.com/en/procurement-operations/trends/procurement-in-2020 This evolution of procurement to business advisor has allowed the procurement team to drive 150% more savings across a much larger spend base, and absolutely getting more out of their spend data for procurement.
Data Transforms Procurement Into a Trusted Advisor to the Business
Data is the core. Historically, procurement owned the purchasing process and did not bring much value to the business, other than helping “negotiate this contract” or “onboard this supplier.” As more process is automated by software, procurement teams must deliver true value or business insights and partner effectively across the business. Thus, the team must move from simply owning the data to advising the business on making smart spend decisions. Better decisions start with insights coming from spend, supplier and contract data. Both the data and insights should be shared with the business partners. The most effective procurement teams walk into meetings and collaborate with the business partner using their spend analytics as the center of the conversation. This requires procurement teams to be aligned on strategy and tactics. Business partners must also trust that procurement is data-driven and capable of executing mission-critical sourcing initiatives for the business on a timely basis.
Data-Driven Procurement is Everything
Where do I start and what data do I need to transform to a critical business advisor? Greg highlights aggregated spend data as the core, “Data inputs are not limited to purchase orders, payables, buy-side contracts and supplier data; and they need to be appended with supplier performance and risk information to create a supplier intelligence portal. But why stop there? You should also couple supplier (buy-side) data with customer (sell-side) information to create a truly holistic relationship management view. The objective is to intake as much relevant information that empowers an organization to generate actionable insights.” This data needs to be aggregated, cleansed and normalized well. The data likely sits across multiple systems like your ERP, your procure-to-pay (P2P), and your contract management system. Many companies have multiple ERPs, P2Ps and data silos. Contract data can be sparse and disorganized. This data needs to be normalized and connected into a full view of a supplier. For example, UPS can show up with more than 700 different vendor names across systems. Good and services largely purchased by P-card can be even more complicated. Uber, for example, will have more than 30,000 unique vendor names in a typical company’s spend data.
Partner with an Expert
There is a lot of data to be aggregated, cleansed, normalized, and categorized across multiple sources. The good news is that there are many partners or vendors (like Suplari) who can automate the data aggregation process and provide cutting edge analytics and insights as a part of data-driven procurement. Customers find that the data aggregation process can often require a significant amount of time and internal resources to be done well. Using a partner enables a procurement team to focus on strategic activities like sourcing events, collaborating with business partners on strategic initiatives, and investigating the business insights that your analytics system is highlighting. As one Suplari customer said, “Suplari provides us a high ROI by moving our team out of repetitive activities like data aggregation, while enabling them to focus on our core initiatives around reducing spend and enabling the business to move faster.”
Empower Your Team
Finally and most importantly, Greg highlights the need to empower procurement teams to more out of their data and insights to drive the business. Using data-driven analytics to make better decisions is one of the most important business skills for procurement and sourcing teams. Teams need to learn how to use data and visualizations to form a thesis on a strategic initiative. Many teams wait for the data to be perfect before starting to leverage spend analytics in sourcing, spend reduction, and budgeting initiatives. “Directional” data is often good enough to make strategy decisions in a category. Data encourages critical thinking, listening, leadership on the team to work across the business and then engaging with suppliers to execute critical business initiatives.
Learn more about VSP and Suplari here: https://suplari.com/vsp-webinar-digital-transformation-of-procurement/