Visibility and Transparency is Still a Challenge in Procurement
With all of our technology, big data storage choices, apps, data visualization tools and statistical packages, visibility and transparency remain a challenge for procurement teams. To make clear the difference between the two, when I speak of visibility, I am referencing the ability for procurement professionals to access and analyze their own internal procurement data. When I speak of transparency, I am referencing the exposure of procurement information to the public.
In the November edition of ISM Magazine, Mark Crowder noted the following:
If not well-managed, widespread data availability can produce merely interesting results rather than insightful ones. Despite capturing an abundance of information, many procurement organizations have not yet developed an approach to use the data in a meaningful way. In fact, it’s common for companies to build tracking mechanisms using procurement metrics, then fail to regularly share these metrics with their suppliers as a basis for performance management or remediation.
I have worked with teams in multiple business areas such as HR, engineering and procurement and conducted analytics projects throughout organizations. The comment made by Crowder describes the same challenge I see in almost every business area.
For procurement professionals, gaining access to the necessary data can be challenging. Contract data may be contained in a contract management system (CMS) or painfully in spreadsheets and paper documents. Financial data may be stored in ERP systems, smaller accounting programs or, again, painfully in spreadsheets. The challenge of putting these data sources together for a deeper spend and supplier performance analysis can be a daunting task for procurement teams.
IT knowledge or IT support to get the work done may not be available in-house since most companies are resource limited in IT... or they have no internal IT. Most IT teams have a prioritization procedure for resource allocation and if you work in Procurement, Human Resources or another support function, you can rarely “make it” on the IT list of approved projects each year.
According to the annual CPO survey conducted by Deloitte, in 2018, Supply Chain transparency remains a concern for procurement executives, especially amid more legislation designed to combat slavery and human trafficking.
Providing transparency of procurement activities requires revealing your supply base to the public. In most cases, this isn’t a good idea from a competitive point of view. In addition, while a company’s contract management system can collect all company contracts in one place, when the number of contracts becomes large, it is difficult to audit or monitor all suppliers and their ethical behaviours. Exposing your supplier list can yield unexpected attacks on social media leading to brand devaluation.
Adding to that challenge is that visibility beyond a company’s suppliers, i.e., into the suppliers’ suppliers is even more complex and difficult to maintain from both a visibility and transparency point of view. Other than some larger companies, the vast majority of companies do not have visibility beyond their own supply base. Visibility is required before transparency is possible.
What is currently “realistically possible” for each company will greatly depend on the status of data, where it’s stored and how it’s stored. Data visualization tools are providing better and better capabilities for real-time connections to data. However, sometimes those real-time connections can be slow.
The good news is that even without real-time connections, it is currently possible to refresh ongoing “snapshots” of data to refresh analytics dashboards and analyses as needed. This has been performed in applications that span virtually every functional area.
Careful Planning is Required
Careful planning is required to map out an analytics journey with its priorities and requirements, but with today’s tools and expertise, procurement teams can use analytics to reach the next level of strategic supplier management. Spend analytics and a more detailed look into supplier performance is attainable.
Tracey Smith is a recognized analytics expert, speaker and author. She is the President of Numerical Insights LLC, a boutique analytics firm addressing the needs of businesses large and small. If you would like to learn more, please visit www.numericalinsights.com or contact Tracey Smith through LinkedIn.