Blog December 6th, 2023 Spend Transparency - why this is so important and how you can gain it

Thomas Teichmann

A comprehensive analysis of spends forms the foundation for successful procurement. Our founders, Samir Kharkan and Thomas Teichmann, have recognized this in more than 15 years of practical experience in operational and strategic positions in procurement organizations and supply chain management consultancies. These findings are also supported by studies conducted by the Aberdeen Group, which show that over 86% of the companies surveyed regard spend transparency as a key success factor. Yet, surprisingly, only around 40% of companies have the necessary spend transparency.

In this article, we aim to illustrate the true value that transparency across the entire procurement volume provides, the common obstacles that companies face, and how to overcome these challenges.

What are the resulting problems without Spend Transparency?

Companies that do not have sufficient transparency in their procurement process face a variety of issues that negatively impact their procurement strategy and the efficiency of their operations. Here are some of the most common problems that companies without spend transparency experience:

1. Lack of control over Spending:

Without transparency, it is difficult to control spending and develop cost-saving strategies. This leads to
missed savings opportunities and inefficient spending.

2. Shortage of strategic savings:

Companies that have no clarity on spending can miss out on strategic savings of up to 75%. This means they
are missing out on opportunities to optimize their procurement processes and reduce costs.

3. Challenges with contract compliance:

If the procurement department has little transparency, it is also difficult to ensure that contracts are
properly adhered to. This can lead to losses and severely damage the relationship with suppliers.

4. Lack of data quality:

A common problem without spending clarity is inconsistent data quality. Companies often doubt the quality
of their data, which can lead to uncertainty when making investment decisions.

5. Dependency on Excel:

Many companies rely on Excel to perform spend analysis because their ERP systems are not adequately
equipped. This leads to inefficient and manual processes that waste time and resources.

<U>6. Poor standardization of evaluations and reports:

Without clear transparency standards, companies lack the ability to create uniform evaluations and reports,
which makes decision-making more difficult and impairs efficiency.

The Value of Spend Transparency

The importance of spend transparency is impressively underlined by the comprehensive study by the Aberdeen Group ("Aberdeen Group - Spend Analysis - Working Too Hard for the Money"-Report). In this study, companies with and without spending clarity were analyzed to determine the impact on their business success. The results are astonishing and illustrate why spend transparency is so crucial.

The study shows that companies that have implemented Spend Transparancy have achieved strategic savings of up to 75%. This enables them to optimize their procurement processes and realize significant cost benefits.

In addition, the improved control over procurement volumes resulted in companies being able to manage their spending 34% better. This is essential for keeping costs under control and using resources efficiently.

Contract compliance increased by 34%, leading not only to cost savings but also to a better supplier relationship. Companies were able to minimize contract violations and optimize cooperation with their suppliers.

These impressive results make it clear that Spend Transparancy is a smart investment that has a significant positive impact on business success. Companies that are hesitating should consider these benefits and consider implementing Spend Transparancy tools like SCALUE to realize their full potential.

Want to learn more about how SCALUE's solution can help you get more transparency into your procurement?

Schedule a free demo now!

So why do many companies hesitate to implement spend analysis tools?

Our procurement specialists have encountered the following three challenges repeatedly in recent years:

1. Inconsistent Data Quality

The first major hurdle on the path to spend transparency often lies in the seemingly inconsistent data quality. Many companies doubt the quality of their data and fear that investing resources and finances will yield no new insights. The concern is that an investment in this area may lead to a misjudgment. However, our experience has shown that valuable information can be extracted even from seemingly poor data.

Furthermore, we have found that approximately 6-12 months after implementing our tool, data quality has improved significantly and has helped to identify and eliminate weaknesses.

2. Using Excel Due to Lack of Alternatives

Another obstacle that companies often need to overcome is the fact that employees resort to using Excel due to insufficient analysis and presentation capabilities in their ERP systems. This approach may be widespread within companies because employees are familiar with the flexible analytical capabilities of Excel. However, they suffer from the limited analytical possibilities and capacities, as well as the high manual effort that comes with a "manipulable data basis."

3. Difficulties in Standardizing Analyses and Reports

Before diving into the world of spend transparency, it is crucial to review and precisely define your requirements for various analyses and reports. List all analyses and reports from the past 6 months and question which analyses are necessary to support your procurement in the future. Deriving the main criteria from these analyses is the next step. For example, if you want to analyze invoice volumes for 10 suppliers at the plant level over different time periods, your main criteria are: supplier, plant, invoice value, and timeframe.

Once you "bring along" the involved employees in procurement and IT with this approach, you not only increase the transparency of your analyses but also their acceptance. This way, you gradually develop a sustainable and standardized analysis architecture. If you also source the data from a single point of source, you can create quick and reproducible analyses. This enables you to update and distribute standard reports for management with just a few clicks.

The solutions from SCALUE

Now that you've recognized the problems and obstacles your procurement managers face without visibility, let's take a look at the solutions SCALUE offers. Our procurement analytics can help companies overcome these issues and optimize their procurement processes.

Here are some of the key benefits that SCALUE offers:

• Basic analysis functions:
  SCALUE Essentials provides transparent insights into your spend data
  and enables you to make informed decisions.

• Recording procurement initiatives:
  With SCALUE Advanced you can track and optimize procurement initiatives
  to optimize them in order to realize strategic savings.

• Automated process analysis in the purchase-to-pay process:
  SCALUE Excellence provides a comprehensive analysis of the entire
  purchase-to-pay process to increase efficiency and ensure contract compliance.

Be the driving force in your company and use Spend Analysis as a key player for the success of your company.

Implementing transparency in procurement can have a transformative effect on your career and your company. Use this opportunity to tap into undiscovered savings potential and take procurement to the next level.

In the world of procurement, transparency is the key to success, and you have the power to shape that success. We are ready to support you along the way.

How SCALUE can help you? Schedule a free demo now!

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