Spend intelligence: before you audit

3 steps to making sense of your data before a spend audit

As ethical procurement and shifting global conditions transform the supply chain landscape, spend intelligence is becoming vital to robust and resilient procurement. Gone are the days when saving was the only agenda item. Procurement professionals are firmly in the spotlight as guardians of company ethical, social, environmental and governance status — and that of every supplier in their network.

We have the technology: straight to an audit?

When you invest in smarter procurement software and tools, it can be tempting to jump into an audit that will unearth every potential issue and opportunity. But supplier relationships is a full-time job — and adding an immediate spend audit might leave you with a frazzled procurement team.

An audit is not necessarily the first step when you introduce new technology, says RobobAI COO, Dan Pironti.

“You have to start with connecting all the data you have, and integrating everything and to see what’s possible,” he says.

“It may be more of a diagnostic than a comprehensive audit of every spend category and supplier. Finding some cost savings is often the driver — you can prove it out and feed transformation by reinvesting the savings.”

Here’s 3 things to consider before an audit on your procurement policies and supply chains:

1.   Set the baseline

Base level data and information is rarely in a good way when you’re introducing a unified new system. Data may be coming from spreadsheets, out of the ERP, or any number of shadow contractor agreements without proper documentation or due diligence.

The first step: consolidate all your data so you can compare apples with apples and move beyond only analyzing spend. Information from the ERP or pulled from P&Ls only identifies total spend — there’s no meaningful analysis of what’s behind it.

“If you jump in fast you might get to some overall numbers, but you won’t know how to dig into them or what to do about them,” says Dan.

“By connecting the data dots upfront, you set up a total spend view that we can start to categorize.”

2.   Sort your categories

Joining those data dots to know your spend sparks new questions: what's contracted and what’s not? Categorizing spend in a unified platform unlocks where money is being spent at a more granular level. Categories are the fundamental building block for undertaking meaningful audits.

Dan says that without connecting those dots, there’s a limited chance to make a real change to spend.

“Without that initial data and creating some meaningful spend categories, there’s little chance of making any strategic moves that will move the dial on your procurement performance.”

“Look for a platform that enables you to do some retrospective category reporting — and that allows you to separate categories to minimize risk when diagnosing specific category issues.”

3. Get to know your suppliers and contracts

Integrating your data and starting interrogating your spend categories, and you have a better chance of getting actionable insights on your suppliers.

“This next step means starting to look at how all our suppliers interact with risk, compliance and align with your own procurement policies — not just limited to spend, but across human elements,” says Dan.

“It can be an incredibly complex process. At a basic level, if I can understand who we spend with, under what categories, are they contractors or one-off suppliers? That provides that first spend cube view so you can set priorities - if you can see that 300 suppliers are providing office stationery to three sites, you can manage that with confidence.”

For established organizations, going back over each contract and reviewing the operations of each supplier is a daunting task.

But without the tools for comprehensive spend intelligence, you may be left open to overspending, reputational damage, legal challenges and loss of revenue.

No one has the luxury of starting from scratch

Startups with a clean business slate can implement due diligence and policies to only partner with ESG compliant suppliers from the start. They have a clear line of sight to ensure suppliers align with their corporate values and comply with contractual requirements.

For most organizations, it’s not that simple. With multiple suppliers, acquired over many years, that clear line of sight is lost — especially if suppliers subcontract work to shadow suppliers who won’t be on your radar.

“Shining the spotlight on your supply chain identifies opportunities and risk,” says Dan.

“The focus on spend reduction is changing. Companies are looking for ways to find out what's happening in every aspect of their supply chain. That’s what Robobai does — it surfaces that information and insights for your company to act on.”

Are you focused on what really matters in your supply chain? Download RobobAI latest whitepaper and discover the hidden truth in your supply chain.