How to Evaluate the Impact of Procurement Initiatives
Global economic developments of the past few years have thrust Procurement’s impact into the spotlight, and the result has been as uncomfortable as the stage shy among us might suspect.
So what steps can you take to obtain a reliable picture of your organization’s spend? Here are four tips we’ve learned from our work with some of the world’s most effective teams.
Track progress in a centralized hub
Procurement’s data situation can be simultaneously characterized as siloed and fractured. It’s hard to access and even harder to piece together a coherent picture of organizational spending because data is everywhere, and all of it has a different format!
That isn’t Procurement’s fault. Decades of mergers, acquisitions, shoehorned financial tech investments, and other decisions outside of Procurement’s control are to blame. But Procurement is usually held at fault when it can’t fix the problem and provide a clear picture of what’s happening in the business and what the function did to address it.
The first step to measuring your impact, then, is to track your projects and their outcomes in one place that everyone can access. Many teams turn to spreadsheets for this very reason, but they create a host of issues that we’ve discussed here.
Instead, your team can leverage a tool like Procurement Performance Management (PPM) that’s built specifically for managing procurement projects across the business and making their results easy to see.
Understand what success looks like
Sharing your reports can be tempting, especially if your team has struggled with data and performance tracking in the past. However, once you’ve centralized your impact, you’re going to have a lot of data to show off. You’ll need to pick and choose what will be relevant, meaning you need to know what success looks like for Procurement, both globally and in your organization.
This will involve two sub-steps. One, obtain clear guidelines from Finance and your other procurement stakeholders. Two, obtain quality benchmarking data you can use to compare your results to teams from across the globe.
The first is fairly easy; work with your stakeholders to set goals, understand expectations, and align your projects with their desired outcomes for the quarter, half, or year. The second will take a bit of outside help, which is why our performance management and spend analytics solutions contain built-in, up-to-date benchmarking data from leading teams around the world. By combining this information with focused stakeholder relationships, you can fuel ambitious procurement processes that reach their goals more easily because they know where they’re going.
Read more about our procurement benchmarking data here.
Take a realistic look at the state of Procurement
There’s no way to measure the relative impact of something if you don’t know what a situation was like before or after you make a change. Procurement is no exception. To effectively report and even understand how you’re impacting the business, you need a way to see and evaluate the state of organizational spending.
This means you’ll need spend visibility that allows you to overview 100% of your organization’s indirect spend. Otherwise, you’ll be stuck evaluating your impact in a vacuum. Traditionally, unlocking this kind of visibility has required a significant investment in talent, time, and solutions that bring multiple suites, ERPs, and BI tools together. As a result, it’s been neither feasible nor productive.
However, SpendHQ’s spend analytics solution is built on a mixed methodology approach that is half procurement expertise and half machine learning. This approach to AI in Procurement allows teams to eliminate limited spend visibility in a fraction of the time compared to traditional approaches. With it, teams have the information they need to find 31%+ opportunities, predict their potential results before acting on them, and then report their realized impact 30% faster.
Read the full story of how we use AI for 80% faster time to value.
Smile at what didn’t work
This final tip may be the hardest to implement, but it’s arguably the most important. No matter how well you plan and execute, Procurement will find a way to be difficult and unpredictable. A key part of evaluating Procurement’s impact is looking for the lessons in this unpredictability and then using them to make improvements, no matter how minor.
This continuous improvement mindset will be your greatest asset in the search for demonstrable, high-level impact. In fact, it will bring out the full value of any Procurement solution you invest in by enabling you to see disappointing results and turn them into opportunities for further impact.
Conclusion
Evaluating and reporting Procurement’s impact has never been more important. New forms of risk, increasing regulations, economic uncertainty, and new incentives for ESG growth create new challenges for Procurement, but they also offer new opportunities for high-profile wins.
To capitalize on these opportunities, though, you’ll need a way to make sense of your performance in the context of your organization’s entire spend cube. Our solutions can help. If you’re ready to see how you can cut through Procurement’s data chaos to achieve 360-degree performance visibility, click the button below to schedule a custom demo now.
