CPOs running their procurement operations without visibility into spend are committing procurement malpractice according to a recent article in CPO Rising. The article predicts that procurement teams without spend visibility will be dead-on-arrival.
In the procurement world, spend visibility is the foundation of good decision-making. Without it, businesses are operating in the dark, unable to identify cost-saving opportunities, manage supplier relationships, mitigate risks, or make informed strategic decisions.
Procurement teams have a responsibility to identify and manage supplier risks effectively, and without spend visibility, they cannot adequately assess these risks. This could lead to significant legal and financial consequences for the organisation.
But what is spend visibility? Why is it so important in procurement? What are the challenges around implementation? What does it mean if you don’t have it? And how can Comprara help? Let’s get stuck in.
What is spend visibility?
Organisations with a clear and comprehensive understanding of their spending activities have spend visibility. The goal here is to obtain the information needed to make informed decisions around spend, cost cutting and mitigating potential risks. Spend analysis, the core of procurement activities, cannot happen without spend visibility.
Want to know if you have the necessary spend visibility? Try answering these questions relating to any category of spend:
- Who are we buying from?
- How often and how much do we buy?
- Did we get what we asked for?
- Where was it delivered?
- How does this compare to previous years?
Good spend visibility allows these basic procurement queries to be answered efficiently.
Why spend visibility is so important (in a snapshot)
Identifying cost-saving opportunities: Spend visibility enables procurement to identify areas where the company is overspending or where there are opportunities for cost savings. Procurement can negotiate better prices with suppliers, consolidate suppliers, or eliminate unnecessary expenses by analysing spend data. .
Improving supplier management: With spend visibility, procurement can identify the suppliers that are providing the best value for the company and those that may be causing supply chain disruptions or quality issues. Procurement can use this information to improve supplier relationships, renegotiate contracts, or switch to better-performing suppliers.
Enhancing risk management: Spend visibility enables procurement to identify and mitigate potential risks in the supply chain, such as supplier fraud, non-compliance with regulations, or supply chain disruptions. This helps to ensure continuity of supply and reduce the likelihood of costly disruptions.
Supporting strategic decision-making: With spend visibility, procurement can provide valuable insights into other areas of the business, such as finance, operations, and marketing. This enables the company to make informed and strategic decisions based on a complete understanding of its spending activities.
What are the challenges of getting spend visibility?
The procurement world knows how important spend visibility is. It also knows how challenging it can be to implement, which is why so many organisations are still fumbling in the dark. For instance, spend visibility can only be as good as the data it collates. Not only can accuracy be wanting, but the data itself can be spread across multiple systems and formats.
Collecting the data into a single system can be difficult and laborious without cutting-edge spend analysis software. Adding to that is the reality that many organisations simply don’t have the in-house expertise to work with this kind of software.
There’s also the huge factor of stakeholder buy-in. While we all acknowledge how crucial spend visibility is and how poor procurement is without it, obtaining the right systems and software does require an initial investment that some short-sighted managers can’t bring themselves to sign off on – particularly not when budgets are tight across nearly all industries.
The Dark Side: What does it mean if you don’t have spend visibility?
- You won’t see where overspending is occurring. Compounding this is the fact that you will miss countless opportunities for savings. Nothing is more frustrating to a business than knowing it can’t see the opportunities that could be the difference.
- You won’t be able to manage supplier relationships adequately. You won’t see who is underperforming or why, and you won’t see how their performance is impacting upon the rest of the supply chain. Without good spend visibility, contract managers are basically hamstrung.
- Where are the risks? Everybody is faced with them; your ability to identify them and reduce or nullify them sorts the wheat from the chaff. Spend visibility is the key here.
- Leading on from the above point is a lack of agility and responsiveness. Spend visibility gives you an eye onto the markets you’re spending in – their trends, potential slumps and maybe even labour issues. Without anticipating these, you can’t respond in time to manage existing suppliers or even switch before disaster strikes.
No decision is adequately informed if it hasn’t been made based on good spend visibility.
We can help with spend visibility implementation
As we’ve noted, there are challenges to attaining spend visibility. But we’ve also seen how crucial it is to the procurement function. So, what can businesses do?
The simple solution is that you bring in the experts. Spend visibility is what Comprara provides. We have the cutting-edge systems, processes and software s needed, as well as the expertise and experience to show you how to implement it and manage it, ensuring you get the most out of it.
If you want a window into what your world could look like, check out our Spend Analytics Starter Kit and get in touch with us to discuss the clarity of your future.