Three reasons why now is (finally) the time to unlock the maximum value of every dollar spent in your organisation.
Many in procurement roles around the world have experienced a change in their contribution to the business over this past year. At once invigorating and stressful, there has been increased opportunity to add value to the business, as organisations dealt with the impacts of Covid19.
Smart procurement and supply chain management has helped companies function through the pandemic. Strategic spend decisions have been prioritised over cost cutting and profit generation, to ensure businesses could operate, pivot, adjust and survive.
Business spend management can be transformative as we move past the pandemic, and procurement can continue to be a key player in making that happen, but there is an obstacle. The functions involved in business spend are separated by silos.
Spend management is stymied by silos
Are Procurement, Sourcing, Accounts Payable, Supplier Management and Contract Management operating as separate processes within your business? If so, yours is not the only company running them in silos with different tools, and having a difficult time sharing data across departments.
Market assessments like the IDC MarketScape and the Gartner Magic Quadrant are evidence that the industry at large treats these categories as separate processes. You wouldn’t be the only one wishing for a clear, real-time view across all your business spend data to help make smarter decisions.
Removing silos is not a new concept, but in this case it is the key to unlocking the maximum value of every dollar spent across your organisation.
Three reasons to remove silos and redefine “spend”
1. Cost management is top of mind
When the pandemic hit, Procurement, Sourcing, Accounts Payable, Supplier Management and Contract Management were under pressure to figure out how to make it all “just work” to keep their businesses operating. Moving forward, survival, growth and competitiveness will depend on an organization’s ability to effectively manage its spend. Collaboration across these business functions is critical, now, more than ever before.
2. Better information is required to make high value spend decisions
Business Spend Management is about more than just getting the lowest price. It’s also about deciding when to spend, and on what. The uncertainty of the Covid19 crisis caused many companies to put a freeze on their spend decisions, but forward-thinking businesses don’t focus on cost cutting and containment for long. Smart spending is required to continue to deliver products and services, retain employees and support business goals.
Thanks to lessons learned during the pandemic, many have realised they need better visibility across all aspects of spend.
That includes supply chain management and everything required to update, diversify and sustain the supply chain. It includes sourcing, bringing on new suppliers and managing the risk that creates for the business. Businesses also need to manage third-party risk, as well as payments and liquidity. Every step is an opportunity to uncover and unlock potential value.
There is so much information hidden within your company’s silos. Working smarter requires allowing these business functions to work well together to inform and enable smarter spending.
3. Business spend is your organisational strategy, put into action.
Business objectives and priorities guide business strategy, and should also provide the value drivers for business spend.
For example, if the objective is better sales margins for the product range, the team will need to find ways to reduce production costs. That could be through management of existing suppliers, finding alternatives, or perhaps there are processes that could be streamlined. If service delivery must be improved, that will guide the next round of investment decisions and might prompt procurement to source the technology required to support modernised, digital service delivery. Perhaps the global pandemic identified gaps in the supply chain that need to be filled, or areas where the organisation needs to diversify suppliers to avoid future disruption.
The company’s core values must provide guidance, as well. Many Australian organisations are currently diversifying supply chains to include more indigenous suppliers, and assessing supply chains to weed out modern slavery. Many are prioritising sustainability and are addressing that along the supply chain as well.
All of this and more should guide the design of an organisation’s spend management processes and policies, and at the same time identify the ways in which smart spending will add value to the business.
Maximise the value of spend
Don’t let the traditional connotation of the term “spend” be a limiting factor for your business. Spend is not about cost, it’s about value maximisation.
Now is the perfect opportunity to look for ways to work smarter and get past inefficiencies that plagued your businesses long before the pandemic.
It’s time for organisations to break down the functional and technology silos that inhibit visibility, control and agility. How? By supporting collaboration and cooperation through updated processes and tools, sharing data across the business, and bringing together the management of all aspects of business spend.