I’m told that the best attended break out session at the recent CIPS conference came from Sammeli Sammalkorpi, one of the founders and directors ofSievo, who market one of the most interesting software products around in our opinion. (And we’ve been writing about them for ages, long before they became one of our associate sponsors, I should say).
We’ve seen his presentation now, and it gives a very clear description of some issues that are often found with ‘conventional’ spend analytics products, before explaining what makes Sievo different. That difference comes from the way the product digs into the spend data to derive an analysis of what is driving price changes. So it is the closest thing I’ve seen to providing a real savings measurement tool.
Sammalkorpi describes the way that analytics can (and should) look both forwards and backwards, and serve both a procurement agenda and a wider business purpose. (Click on the chart for a larger and clearer version ).
But the problems start with the procurement contribution to financials or savings measurement - CFOs don’t believe the savings numbers produced by procurement, spend (and savings) aren’t visible, no-one can check the veracity of the numbers produced, and perhaps most seriously, the “savings” procurement may genuinely feel they are making can’t be tracked through to the bottom line.
So, as Sievo say “we started by developing a common language between finance and procurement: PCF© (Procurement Contribution to Financial performance)”.
That looks to isolate the components of price and total cost changes – such as currency, volume, market and the “genuine” procurement actions. that is done by pulling in data from a number of c=sources, including market and supplier data where appropriate, as well as internal “proxies” – so for instance, if the number of employees changes, certain spend categories would expect to see a consequent increase of reduction in spend.
That’s all very powerful in itself in terms of looking back to assess the contribution of procurement. But it also can play a role in forward spend budgeting and forecasting. If you understand the drivers of spend to this degree, you can start to look at future spend with more certainty. Procurement can predict the impact of likely changes in terms of increased or decreased costs for business units or functions. So that can lead into informed decisions around the need for sales price increases; options around hedging or fixing future prices; or changing the sales mix to mitigate impact, just as a few examples.
As Sammalkorpi said, if procurement wants to build board level credibility, then “strong financial alignment requires linking spend and savings”, with shared definitions, the ability to isolate drivers of spend –and the ability to look at direct, indirect and capital expenditure spend in different ways. (Indeed, that’s another whole topic, for another day perhaps).
Sievo是但书ded in 2003 and expansion has been more than steady. But the firm's other news at the CIPS event was that from January 2015, they will have a physical presence full-time in the UK for the first time. Nora Huovila, who is Finnish but speaks perfect English and even likes English beer, is moving to London to represent the firm. We wish her well, and we’ll have more from Sievo soon. In the meantime, if you want the full slide pack from the CIPS presentation, please drop a quick email to Nora atNora.Huovila@sievo.com
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