6 December 2011 | Angeline Albert
A lack of spend data is like "buyers trying to drive blindfolded". Angeline Albert explores why this problem persists and what can be done about it.
Details on what is spent, with whom and when is crucial for buyers, but a lack of data – or lack of transparency – means many are missing key details they need to make informed spending decisions.
As we reveal here, some 68 per cent of private and public sector buyers responding to the latest SM100 poll say their procurement function does not have access to all the data they need. Concerns over this paucity of information was raised as a major challenge at The Society of Purchasing Officers in Local Government's 2011 conference last month.
At that event, John Connell, head of local assets and procurement at the Department for Communities and Local Government, said: “I know some of you have difficulties trying to find out what someone in your organisation has decided to spend. I can’t believe there isn’t more data for you to use to compare with each other. It is the biggest shocker I have. I couldn’t tell you who is in my Olympic squad – meaning who are the best of procurement. There is no comparable data.”
Purchasers told SM the problems they face include IT systems that aren’t linked, duplications or repetition of suppliers whose names are spelled differently and resistance to the idea of data transparency.
A system set up by the United Nations gives a specific code to millions of products and services across the globe in every sector. The UN Standard Products and Services Code allocates a particular code number to everything from cleaning buckets to oil-field consultancy services but a reluctance to use these means organisations start inventing their own identifiers for goods and services.
A business case
Outdated systems make it difficult to monitor overall business activity fully, says Paul Revell, supply chain manager at Capita. “For buyers it’s like trying to drive blindfolded. There needs to be a frank and open argument held with senior management to ensure that adequate investment is made.”
Colin Cram, managing director at consultancy Marc1, previously worked on improving the comparable data of councils in the North West and suggests buyers produce a reasonable business case defining what information they expect to get, how they’re going to use it and how it will benefit the organisation. He says this approach particularly works if finance directors can see a quick return in the same year the money was spent.
Gary Moore, procurement performance manager of defence information, training and services at BAE Systems Integrated System Technologies, said: “Wherever I’ve worked you can get the data you need, the only variable is the ease with which it can be collated. One system equals good, many systems, personal spreadsheets and the like equals bad.
“Once you’ve got the spend data, the analysis in many ways is the easy bit. The consistently hard bit, whatever sector, can be the forward forecast, ensuring we have the right mix of suppliers ready to deliver the business in the future and the ability to tell suppliers what our likely spend will be.”
Many buyers contend visibility of spend need not require a private sector company to supply the latest in IT software. An IT literate member of staff can, even with the worse finance systems, download raw data and analyse it in a spreadsheet system like Excel or Access format. This can identify what was spent with which supplier, the number of transactions, total spend, location of vendors, spend with SMEs and spend by individual business units, maverick spend and even fraud.
Use it wisley
Cram says he “doesn’t buy” the lack of data argument. “There are fundamental issues of people not using the data they’ve got,” he says.
He pushed for analysis on expenditure in various roles, including as director of the North West Centre of Excellence where he co-ordinated spend analysis for 31 local authorities. Describing the data as “absolutely illuminating”, he says it enabled the councils to see what they bought in common and what was distinct to their authority. It also helped them see where they were buying locally. He says there was plenty of evidence that people didn’t use the information they got from the spend analysis, “partly because they didn’t have the skills and so didn’t get much benefit from it and stopped. That is unfortunately down to procurement people.”
Some buyers believe they have succeeded in beating the data challenges faced by others. Malcolm Madeley, purchasing manager at Sears Manufacturing (Europe) says: “It may be different in the private sector. Most of the decisions we make we have to drill down to every nut, bolt and washer that goes into the makeup of a product with costing information readily available. This helps us analyse the true cost of a product to make informed decisions. I’ve never known it any other way.”
It may be a challenge getting spend data across some parts of the public sector, but at Walsall Healthcare NHS Trust steps taken by the procurement team resulted in it being shortlisted for a 2011 CIPS SM Award in the ‘most improved purchasing operation – start up’ category. Before the trust’s implementation of e-procurement, requisitions were paper-based and purchase orders were keyed in as free text. Head of procurement David Smith’s team created a unique part number for more than 15,000 items and attached codes that enabled data to be built into categories and used for spend analysis. “It takes a lot of effort, but the rewards are worth it,” he says. “Some 18 months ago, we had no data at all. Due to deployment of an e-procurement system, we now are building valuable data.”
The Department of Health (DH) announced last month that it will make more data available to help trusts buy IT more effectively. Via the eHealthInsider website, trusts will be able to rate IT suppliers and systems’ performance. DH isn’t the only department attempting to address this problem. The Government Procurement Service is working with other departments on a pan-government supplier information database (SID4GOV) to enable better evaluation and purchase of IT systems.
Concerns about a lack of data are clearly present, but perhaps also avoidable. With a clear case to the board explaining the benefits of investment in data analysis, close engagement with stakeholders to extract raw data from business units, and by liaising with suppliers to help deliver greater transparency, the potential rewards are out there for the taking.
Problems and possible resolutions
●A lack of connectivity between existing IT systems
●Duplications or repetition of suppliers whose names are spelled differently
●Resistance to the idea of data transparency
●A reluctance to use standardised global codes for products and services
●A lack of support for investment in new tools
●Too many different systems/personal spreadsheets
●Make a clear business case for investment into a spend data system or transparency within your organisation
●Use Excel or Access tools to analyse what is spent with whom and when
●Use supplier and stakeholder engagement to find out information
●Consider using the UN’s Standard Products and Services Code
●When you get data, make sure you use it