Member Article

Redefine your future spend by studying the past

“Study the past if you would define the future.“ Not the advice of a 21st century management consultant – but the sage words of Confucius, writes Steve Malone of procurement services business Inprova Group.

And although the first thing we think of as a definition of the word “tablet” will be somewhat different to what might have sprung to Confucius’ mind, the maxim most definitely still holds.

Technology is changing purchasing. Procurement professionals must embrace it. But the adoption of software with all its exciting promises to streamline your purchasing has to have a strategic fit. It’s got to be more than “shiny object” syndrome if you’re implementing new software.

Whether it’s strategic cost management in order to complete capital projects on time and to budget; or reporting on spend and value for money; consolidating your billing or spend analysis, ensure you keep the reasons for implementing software and systems in sight.

And as you and your team embrace new systems, don’t forget to use the new, to analyse the old, in order to make the future more efficient than the present.

At their best, technical procurement systems give clients a detailed insight into their business’ third party expenditure - which is essential to support an intelligent, strategic approach to best value procurement.

At their worst though, users allow themselves to become slaves to their new systems without any insights or learning from previous supply chains.

One thing that’s as wise now as it was in Confucius’ day is the value of studying your business’ spending. But the tools available are somewhat more advanced now. The practice is commonly known as spend analysis and it can have an enormous impact on your bottom line.

In fact, it’s a big factor in what makes your business “world class.” Independent and respected research has found that 77% of world class organisations provide a significant level of company-wide spend information compared to 40% of non-world class organisations.

Is it worth it? Well, one of the users of Inprova’s Quantum Spend Analysis – an online platform – was somewhat shocked to find that 38% of the invoices they received cost more to process than the value of the invoice. Examining just one area of that organisation’s spend immediately flagged up unnecessary costs of around £250,000.

Another organisation that utilised spend analysis discovered it had 1,188 invoices in a year with a single supplier. It has moved to a system of monthly invoices, cutting the number from that supplier to 12 – a major saving given the Chartered Institute of Procurement and Supply estimates it costs on average £70 to process an invoice.

And users of spend analysis platforms can typically expect to make 5% to 12% savings on their procurement spend.

These businesses are certainly studying the past to make the future more efficient than the present.

This was posted in Bdaily's Members' News section by Steve Malone .