Welcome to this week’s edition of Whitepaper Wednesday here on the Purchasing Certification Blog. Today, I’ll be reviewing a whitepaper entitled “Next Generation Spend Analysis: Beyond Commodity Classifications” from Ariba.

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The underlying point of this whitepaper seems to be to assail “traditional” spend analysis in order for Ariba to impress readers with its new spend analysis capabilities, as recently reviewed on Spend Matters. That being said, it isn’t all sales pitch and is very thought-provoking for procurement leaders who want to know how they can use information to develop a better strategy.

The whitepaper says that traditional spend analysis is focus on an internal view of purchasing activity and typically “does not take external factors such as market dynamics, recently sourced commodities or best-in-class benchmarks into account.” It includes an example of how using historical spend, as opposed to a market index, as a benchmark for savings may be misleading in terms of determining how successful the purchasing department is vs. how successful it could be.
The whitepaper identifies six “supplier enrichment components” that characterize next generation spend analysis. These components would appear to bounce internal data off of external data that the spend analysis provider integrates into its spend analysis system. Some of these more interesting data points include:

• Supplier financial information;
• Supplier risk assessments;
• Supplier diversity status; and
• Supplier green status

It seems to me that most organizations with a healthy spend analysis program already evaluate these aspects of their suppliers, but do so separately from their spend analysis. Having these components integrated into a spend analysis platform is something that excites me!

Beyond these components, the whitepaper also introduces the concept of integrating market visibility into spend analysis. This section of the whitepaper is where it gets more Ariba-specific. The aspects of market visibility present in next generation spend analysis include price indices, sourcing market dynamics (i.e., access to Ariba’s knowledge of certain categories in a presumably very up-to-date format), and peer spend profiles (i.e., ability to compare certain ratios with other Ariba customers in your industry).

Even though the whitepaper veers into (or at least close to) sales pitch territory, I actually think it is a very worthwhile read. Because all of the aspects presented should be a part of the intelligence gathering phases of your sourcing strategy development. You may just learn some things that you should be doing, but aren’t. The premise (or the fact) that you can get many tasks accomplished using a single portal will surely entice those who do all of those tasks, but have to go to multiple sources for the same information.

You can get your own copy of this whitepaper for free from Ariba’s Web site (registration required).