Many organisations have significant levels of data, in ERP systems, databases or in spreadsheet format. This is not necessarily the same as having information to hand.
Throughout the whole strategic sourcing process, it is vital to build decisions based on facts, and to support this we need to convert data into information. As an example, contextualising your spend data into categories creates a different view of the original data and provides an alternative insight into the way your organisation spends. We can then take this insight (new information) and present it back to the organisation, creating better buy. Strong visualisation of data is key to gaining insights, observing trends and creating information, and the rationale of a dashboard is to provide information based on trends in historical data to accelerate effective decision-making.
Building a Dashboard
Start with a spend dashboard to give you instant visibility, assist with numerous business decisions, and support the creation of the sourcing plan. The key areas of a spend dashboard are:
• categorised spend;
• contract compliance;
• supplier concentration or supplier tail;
• levels of process improvement;
• interactive spend by business area.
A robust spend analysis process can quickly classify spend from different data sources and produce the information required for an opportunity analysis. Start by focusing on existing data (from as many sources as you can find), classifying and presenting to the team in a user-friendly way. Take time to create some meaningful classification structures – meaningful to delivering the outcomes that the business requires, not meaningful to the IT gurus that know a lot about databases.
Examples could be to align your classifications with product lines, regions from the sales side and from the supply side. Generally, spend analysis will allow an organisation to consolidate spend information into a single system so it can understand the behaviours of the business and all aspects of purchasing. Most systems, if you choose to purchase one, will allow ‘drill down’ so you can easily look into the underlying data, and will typically take feeds from all types of ERP and other systems.
Overlay the contract purchases and non-contract purchases to illustrate contract leakage rates as a percentage of the total PO amount. If the total PO amount for a commodity is increasing, you can determine whether the rate of contract utilisation is rising as well. For example, a simple Pareto analysis of categorised spend visualises the tail spend within business areas. Generally, this is a good metric to help with tail management, since improvements can be seen in the dashboards over time.
An example of a process improvement metric that you can visualise on dashboards is invoice analysis. By establishing the average value per invoice, business decisions can be made around supplier engagements and invoicing structure. All dashboards should be interactive, enabling the user to drill down into the data to pinpoint areas of interest or variance.
Alternatively, you can also generate performance metrics dashboards. The purpose of these is to highlight key performance indicators (KPIs). KPIs can vary from business to business; however all KPIs should be agreed upfront and the dashboards then developed specifically to suit the requirements of the business. Compliance of the selected KPIs needs to be shown visually, making sure you include explanation of the KPIs. Without this context, data is meaningless to the end user.
Dashboards can take various presentation formats, the most basic via programmes such as Excel, using a Pivot Table and graphs to visualise the data. Alternatively with a little more investment, dashboards can be presented in specialist front-end reporting tools/software. Linked to databases or financial systems such as Oracle, dashboards can provide real-time information, highlighting key aspects to the end viewer and providing informative data to support decision-making.
Dos and Don'ts
☛ Do use strong visualisation of data to gain insights
☛ Do start with a spend dashboard to give instant visibility
☛ Do focus on existing data and create meaningful classification structures
☛ Do overlay the contract and non-contract purchases to illustrate leakage rates
☛ Don’t assume that holding data within the organisation is the same as having information to hand
☛ Don’t worry about pleasing the IT gurus – your classifications are about delivering the outcomes the business needs