As procurement comes under increasing scrutiny, Procurement for Housing’s strategic procurement manager, Rob Peck, asks if CIOs are providing the necessary management information to drive business efficiencies.
A major challenge for many CIOs is providing senior managers with the management information they need to make business decisions. This is particularly so when it comes to procurement information which is often held in disparate systems, different formats and when spending is classified to budgets rather than commodities. Standardisation, classification, de-duplication and aggregation of spend data is a necessary evil if analysis is to be robust and of sufficient quality to inform business decision-making, but it can take up a lot of time and resources to accomplish successfully.
If you want to maximise business effectiveness for your organisation, you have to have a complete understanding of your current situation. This means looking at historic data, spend patterns and trends in many different areas of the organisation to identify which suppliers, categories or departments warrant attention. For most housing providers, the necessary data will be in a number of different systems, but while accounts payable, purchase ledger, e-procurement, purchase cards and contracts management systems all hold valuable information, it will often be in differing formats and poorly coded, presenting challenges when you try to aggregate them into a single data source.
With the best will in the world, procurement teams rarely have the time to carry out these time-consuming and inefficient processes, which is why an effective spend analysis tool is so critical. Data is collected, cleansed, classified and aggregated into a clean dataset, quickly providing a clear and comprehensive view of organisational spend and enabling you to identify areas for improvement and ask important questions such as ‘why is supplier X raising so many invoices?’, ‘why do we use so many suppliers to buy a single product?’ and ‘why do X per cent of invoices cost more to process than the value of the invoice?’
Clearer visibility of your current situation allows you to prioritise the initiatives that will have greatest impact, and to measure their impact. The process doesn’t have to be overwhelming because once you understand your current situation, clear management information can show you what to do next. From rationalisation of the supplier base, to identifying non-compliant buying, or opportunities for collaboration and volume aggregation, having clear management information can actually make the process pretty simple.
And although finance systems are great for managing spend against budgets and understanding what has been spent, the major benefit of a true spend analysis system is that you can identify what you are spending that you may not need to spend, and in times of significant austerity and welfare reform, it is possible to reduce spending without reducing the amount that you buy.
Rob Peck is the strategic procurement manager for Procurement for Housing.