Break out of procurement silos to get real insight into spend

SUMMARY:

Spend management expert David Hearn believes enterprises must break out of procurement silos to get real insight. Coupa CMO Tara Ryan presents the case.

Money puzzle based on US dollar bill © bartsadowski - Fotolia.comEnterprises that see procurement as a purely administrative function are failing to realize its potential, believes David Hearn, whose career spans procurement roles at Sun Microsystems, Kaiser Permanente and Juniper Networks:

That’s the way it is in a lot of organizations – procurement and AP are seen as clerical, transactional functions. This is the model that frustrates people in the profession more than anything. When people have a mental model that doesn’t value your profession very highly, it can be pretty hard to go to work every day, even if you’re working to change that.

It’s difficult to break out of this because the transactional model has tended to lock spend management into functional silos, says Hearn. One might hold purchase order data, while invoice data is in another, and a third holds purchasing card data. Travel and entertainment expense reporting is typically held in yet another separate system. These multiple databases each have their own way of storing and reporting the data, and if the organization has multiple business units, countries and regions, then the permutations become even more diverse. This makes it virtually impossible to collate the data to analyze spend across the business and provide meaningful insights.

Helping the business

Overcoming these functional silos becomes even more challenging when you consider that each has its own lines of reporting. Often people are worried about handing over access to the data in case there are unintended consequences. All this means that procurement teams have to tread very carefully if they are to make any progress, says Hearn:

You can’t be seen as the spend police because people will just shut you down. They won’t help you, and you won’t be able to help them either.

The way to get their support is to show how the insights from the data will help the business. Hearn gives the example of a company putting on a big customer event at a hotel. The ballroom with catering, lighting and audio-visual equipment will probably be dealt with through the purchase order system. Accommodation for employees working at the event will probably go through a T&E card charged directly to their expense reports. Purchasing cards take care of signage and other last-minute incidentals, while the videographer needs a check on the day of the event. In a traditional setup, the total spend for this one event is scattered across many systems and it’s impossible to stitch it together without asking IT to do custom reports or working through endless spreadsheets.

A game changer

Contrast these separate procurement silos with a SaaS spend management tool that can automatically collate all of that data in one place and has built-in analytics tools that can present it in a form that non-technical people can easily understand.

Now we can go to marketing and say, ‘Okay, you spent $100,000 on your entire event. Of that, $65,000 was with preferred suppliers.’ Marketing says, ‘Oh my gosh, really? We didn’t get any discounts on $35,000. Can you help us with that?’

That’s a game changer, both for procurement, who had been struggling to get a seat at the business table, and for the business, who always looked at procurement as transactional and not providing anything in the way of business insights …

A new relationship

This is the foundation of a new relationship between procurement and the rest of the business that brings benefits to both sides, believes Hearn:

You have to break the mental model by letting them know, ‘I’m coming to you now with different information that’s very insightful to your business.’

It won’t happen overnight, but if you can start break down old ways of thinking in some small ways, and build on that, there’s tremendous value that can now be unlocked.

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