Develop strategies to control maverick spending with Unit4 Source-to-Contract Spend Analytics
Procurement is often overlooked as a strategic player, but with many organizations focusing on their ability to form strategy in modern operating environments the strategic role of procurement is growing in importance.
Yet to do this, as is true across an organization, modern technology is needed to gather data and provide platforms that can analyze data, generate insights, and support strategic processes with various capabilities.
Many procurement functions are becoming part of this strategic shift in operations, and those succeeding find a 2.2x higher return on investment than their peers and are 5x more likely to be viewed as a business partner.
Today, we will look at the role of spend analytics in forming an agile procurement strategy, the value of this for the wider organization, as well as how data tools can help, and how to evaluate these vendors effectively – learn more in this blog!
The Issue of Maverick Spending
Maverick spending is a huge problem for procurement professionals, tail spending makes up roughly 80% of transactions but only 20% of spend volume, and modern Chief Procurement Officers (CPOs) see the reduction of maverick spending to be a top priority for their function.
Chris Sawchuk of The Hackett Group confirms that “The need for procurement to better manage their spend has become a board-level discussion in many companies […] only to find that they don’t have clean and accurate data to make those assessments or have visibility across the entire enterprise.”
It’s clear that procurement needs to develop strategies to manage costs, and perhaps have top-down pressure to do so but lack the necessary tools to gather this data in a manageable way and to ensure visibility and efficiency in this.
The Value of Spend Analytics tools
Historically, organizations may task their finance teams to keep track of and manage spending through static spreadsheet applications like Excel. This kind of manual legacy process can take a lot of time, pulling tables into tables and reports, manually categorizing data, and struggling to manage data across disparate sources.
Much of the problem is that procurement can’t see their spend data, with procurement teams constrained by dispersed, unclassified data across too many disparate systems to facilitate good decision-making and drive bottom-line improvements.
The more your organization and procurement needs grow, the harder this task becomes. That’s not mentioning the practical problems of Excel, such as version history, tracking who made changes and when, and ensuring data is accurate and without errors. Manual workloads alone can be a lot for procurement teams to handle.
The numbers paint a more drastic picture, for companies with yearly purchases of $1 billion, this translates into $10 million in unmanaged maverick spend. Not only is this level of unmanaged maverick spending worrying in today’s climate but shows the level of data that needs to be consolidated and analyzed.
The Hackett Group found that as a result of maverick spending, 44% of organizations have increased purchasing process costs, 41% have increased supply base risk, and 33% have dissatisfied internal customers.
With all these issues in account, organizations need a more efficient, repeatable, and accurate way of monitoring maverick spending and the data tasks that come with it.
How can the Unit4 Source-to-Contract Advanced Spend Analytics module help?
Spend Analytics software is the only solution to the problems of human error, Excel dependency, disparate data sources, and a lack of visibility into both managed and maverick spending.
Unit4’s Spend Analytics module can provide all the capabilities you need to manage maverick spending and reimagine your procurement teams’ strategic value – here’s 6 ways we can help you add strategic value with our spend management tool:
1. Meet strategic goals
With increasing pressure from executives to meet strategic goals, manual workloads and lack of time for data analysis can dampen your team's ability to meet strategic goals.
Increasing transparency into the supply chain with data tools highlights the opportunities to diversify supply and create efficiencies around supply management and teams can form strategy from this, rather than being mired in manual tasks.
2. Increase transparency and accuracy
When all your data, not just procurement data, is controlled within ERP it’s much easier to categorize, consolidate, and compare data with this improved visibility. A single source of truth will provide the business intelligence you need to understand historical, and current spend, and help you accurately forecast future spend.
This transparency creates many opportunities for things like automation, identifying categories where the company might rely on only a few suppliers for a large percentage of its spending, an automated solution can alert procurement officers to high-risk spending scenarios.
Click to read Unit4 ERP Excellence beyond Excel (Gated)
3. Optimize direct spend
Maverick spending can undermine the work that a procurement function does, and direct spending can often be ignored. By solving the maverick spending problem, your teams can also spend time optimizing direct spending, which may not even get a look in with manual workloads and legacy systems.
4. Reduce manual workloads and make time for analysis
Data consolidation is easy when supported by ERP, and this allows for procurement data to easily be turned into reports and more. Importantly, Unit4’s Spend Analytics module can manual processes through AI-driven data cleansing, machine learning, and rules-driven categorization.
5. Understand Maverick Spend, not just control it
Of course, consolidating procurement data is key, but to form a strategy, procurement teams also need support to analyze data. With less time spent on manual tasks, teams have the time, and energy, to analyze data, and with multiple dashboards and advanced reporting capabilities this is much easier.
6. Bring value to finance teams
With a single source of data truth across functions, and with more time for procurement teams to analyze their spending data, these two vital functions can support each other better – discover the full capabilities in this whitepaper.
When procurement can report their spending to the organization’s wider finance teams, they can work together to form agile strategies that feed into and help each other rather than having independent strategies that will be subject to change.
To learn more about the Unit4 Source-to-Contract Spend Analytics module, visit our dedicated webpage, customer stories, or talk to sales, today!
