Data-driven: how the Best-in-Class use spend visibility to gain a competitive advantage
Xeeva welcomes this guest post on spend visibility and strategies for success from Andrew Bartolini, Founder and Chief Research Officer, Ardent Partners.
Ardent Partners recently published its 14th annual “State of Procurement” research study, CPO Rising 2019: #ValueExpansion. And what was true when this series started remains true today – that there may be no greater advantage for the modern enterprise than comprehensive spend visibility and an ability to take action on it. While collaboration, automation, and other core strategies advance procurement’s overall value and influence, it is within the realm of intelligence that Chief Procurement Officers (CPO) and their teams may find the greatest organizational impact. In fact, one of the next great paths to procurement performance improvement will be blazed with the next generation of spend analytics and data-driven strategies.
Simply put, spend visibility and an ability to convert that visibility into intelligence is the foundation upon which a Best-in-Class procurement department is built. – @AndrewBartolini
The good news is that the procurement industry already has a tool in the form of automated spend analysis, which allows it to drive visibility into an array of critical areas related to enterprise spend, including an ability to analyze historical spend by supplier, category, region, etc. The power of spend analysis is quite tangible, with many procurement departments leveraging the capabilities of their spend analysis tools to achieve a deeper understanding of enterprise spend in a scalable and repeatable way – transforming their structured and unstructured data into intelligence and that intelligence into strategies. One group that excels in this capacity is the Best-in-Class.
The Impact of Spend Visibility on Best-in-Class Performance
Ardent Partners research consistently shows that the top-performing procurement departments (a group we define as the Best-in-Class) utilize spend analysis at a considerably higher rate. They use the visibility it enables to place a higher percentage of spend under management than their peers (89% vs. 54%). And, while there is no guarantee that having more spend under management will result in superior performance, Ardent Partners research has consistently shown that the procurement groups that manage more spend report superior performance across most other key metrics.
For example, the Best-in-Class:
- Achieve savings rates that are markedly higher on a much larger spend management portfolio (7.8% vs. 6.7%)
- Use their superior spend visibility to drive higher competitive sourcing volumes (71% vs. 44%)
- Match that activity with compliance rates that approach 80%
Strategies for Success
Ardent recommends the following strategies and approaches for CPOs and procurement departments seeking to use spend visibility to achieve Best-in-Class performance:
- Invest in tools that automate the spend analysis process, making it scalable and repeatable
- Build upon the core spend analysis tools and process with more advanced analytics
- Develop the capabilities to take smart actions using the new spend visibility
Simply put, spend visibility and an ability to convert that visibility into intelligence is the foundation upon which a Best-in-Class procurement department is built. But the Best-in-Class do not stop there – in fact, they are also nearly twice as likely to have a high technology proficiency across their departments, and are more apt to utilize next-generation technologies like artificial intelligence to expand on the impact of their core solutions.
Watch this webinar from Xeeva and Ardent Partners to learn more about what “Best-in-Class” organizations are doing to make your organization more successful!
About the Author
Andrew Bartolini is the Founder and Chief Research Officer of Ardent Partners, a research and advisory firm focused on supply management. He is also the co-author of the CPO Rising 2019: #ValueExpansion report.