A Flashlight in the Dark
| September 25, 2018 | By Chris Jarvis, Director, Spend Analytics & Market Intelligence; Mike Fox, Strategic Sourcing Analyst; and Ralph Maier, Vice President, Contracts Operations & Business Development
If you find yourself walking in a dark room filled with obstacles, wouldn’t you like to have a flashlight?
That flashlight is data – it’s what illuminates that dark room so you can get a handle on your environment. In the world of supply chain, you always start with spend data, because until you know what the situation is, it’s next to impossible to accomplish anything… unless you like the idea of bumping around blindly in the hopes of finding an exit.
The Great Storyteller
The beauty of data is that it tells a story. Sometimes you need to massage and cleanse it – categorize and normalize it – but once you do, it becomes extremely valuable, especially in the decision-making process.
There’s an old saying that many of us have heard before: the numbers don’t lie. And data is no different, but you need to look at what the data tells you and interpret it to ultimately decide if it’s the right story. If something seems off, you need to take a step back and figure out what went wrong without dictating the story you want the data to tell.
Avoiding this kind of confirmation bias is paramount to analyzing data – you shouldn’t look for the answers you want, but instead be as objective as possible to try and understand the results. Just listen to the truth. If you do this right, you can add context to and caveat the story.
It’s Just the Beginning
Collecting data is the starting point to any strategic plan. Once you’ve taken the time to listen to the story, it can open avenues during planning.
In the procurement world, there’s seemingly endless paths you can take to solve a problem. But when you have clean data in your toolbox, the discussion on the best course of action becomes more obvious… or at least easier to decide upon. Data may not solve every problem, but it focuses you into something manageable and strategic.
Getting Your Arms Around Spend Data
To get your arms around spend data, ask yourself: “Where am I? Where do I want to be?” The latter answer should be easy (“In a better place than I am now!”) but if you don’t know where you currently stand, how can you create a plan to get where you want to be?
With clean data, you know where you currently stand in terms of spend. Then, the stories begin to emerge – you can categorize the suppliers you do business with. Perhaps you discover that you have a high volume of business with a supplier and realize you need to reevaluate your contract terms or pricing.
Spend data eliminates time spent fretting over numbers or gut feelings; you don’t argue over whether the spend is $2.2 or $2.8 million, because the reality is right in front of you (what a surprise, it’s actually $3 million!). Instead, you can strategize what to do from here. Perhaps a new RFP is in order, or a conversation with a department that is notorious for off-contract spend. If you can go to your leadership with hard facts, your decisions will be justified.
Spend data gives you the answers you need to have the right conversations with the right people.
Data is Our Flashlight
Strategic, best-in-class procurement begins with spend data, and if we had one data set to drive our company, this is it. It shines a spotlight on our members’ spend and shows us where there’s demand. That demand points us toward opportunities to develop new contracts.
With this data, our contract developers can dive into the spend silos and discover what suppliers are driving each category space, and what our members are buying from those suppliers. This is the first step in ensuring we are delivering the utmost value for our members.
While individual institutions may use spend data to identify the opportunities within their own bubble, E&I takes it further by applying this across our entire membership, ultimately resulting in a best-in-class process that produces a contract with substantial value. By leveraging this membership-wide data, we generate contracts that a single entity might not be able to negotiate on their own.
We act as an extension of our members’ procurement departments because we take the aggregate of their spend data and use it to drive our efforts, which are aligned with their priorities. It’s how we save our members time, money, and resources.
Spend data ensures that E&I is focused on the right things. It is our flashlight in the dark room, illuminating the way to the best-in-class contracts that drive the most value for our members.
About the Authors
Chris Jarvis is the Director, Spend Analytics & Market Intelligence for E&I Cooperative Services. He has over 20 years of financial and analytics experience with a focus on driving out cost for financial, operational, and supply chain areas. Chris can be reached at firstname.lastname@example.org.
Mike Fox is a Strategic Sourcing Analyst for E&I Cooperative Services. His career includes roles as the Director of Strategic Procurement for the University of Colorado and Expense Solutions Manager for Mercury Companies. Mike can be reached at email@example.com.
Ralph Maier is the Vice President, Contracts Operations & Business Development for E&I Cooperative Services. He has extensive experience in leveraging strategic sourcing, consultative transformation, and optimization to achieve best-in-class contracts. Ralph can be reached at firstname.lastname@example.org.