3 Procurement Insights Found When Analyzing Over $800 Billion of Spend

Pasi Viljanen Oct 31, 2018

Two weeks ago Sievo launched the first benchmarking solution based on real procurement data. Peer Benchmarking provides Procurement executives on-demand access to peer benchmarking metrics to identify performance gaps and optimization opportunities. With real benchmarks at hand, Procurement teams can identify World-class procurement performance and track progress against peer groups.

Our Procurement Big Data repository consists of over $800 billion of spend and over 500 million transactions from our customers – numbers that will only increase as the time flows on. In addition to this, we add third-party open and proprietary sources to the mix, for example, market indexes and supplier information. Having access to this kind of data, enhanced with machine learning, we have been able to recognize some interesting facts and insights. Now, I would like to share with you with a couple of our interesting findings. You can find more intriguing details in our Procurement Benchmarks Consumer Goods and Manufacturing reports that you can download for free.

Centralizing and controlling supplier base will deliver long-term benefits

The utilities category is giving us some real-life effects on what could happen to your spend when the number of suppliers grows in a short period. From 2015 to 2017, the utilities spend per headcount in the manufacturing industry ad increased by almost a quarter. At the same time, we saw the utilities supplier count increase by nearly 40 percent.

Reducing the number of suppliers is a crucial strategy for procurement organizations when trying to find better clarity and long-term savings in their projects. If you deal with fewer suppliers, there is less administration and paperwork to take care of – leaving you with more time to focus on other areas of your business. Also, centralization usually brings you lower prices as you leverage your volume with fewer suppliers with also better customer support.

The increased number of suppliers has also affected the payment terms of this category: Utilities category experienced the most significant decrease in the length of payment days (a drop of 1.4 days). Longer payment days give you more flexibility with your working capital. Better control of working capital is an integral part of a more efficient organization.

Marketing spend per headcount has gone down by 12 percent

Contrary to the utilities category, the most significant drop in spend has fallen into the marketing branch. Over the two years, we saw the market category shrink by 12 percent, especially in the consumer goods industry. The amount of marketing spend in the consumer goods category has fallen devastatingly in just two years: the percentage of marketing spend per revenue has dropped by over 30%. Does this mean that marketing is becoming more irrelevant in the marketplace, or is just the effectiveness of newer and more scalable marketing channels proven more substantial?

According to The Salesforce’s fourth annual State of Marketing report that generated over 3,500 responses from full-time marketing leaders — those holding a manager or higher leadership role within their organization globally, the focus in marketing, especially in the B2C world, is transitioning more to evolve customer journeys rather than trying to affect them with direct advertisements. This supports our data which suggests that a significant element in the decrease in marketing spend comes from lowered spend on media buying.

On the path to delivering connected customer experiences, marketers continue to wrestle with gaining a single view of the customer and leveraging data from different sources. The difficulty of achieving this unique customer view is compounded by elevated customer expectations and the tremendous growth of newer marketing channels. When looking at our data, we can see that the transition to creating better-targeted advertisements and by trying to grasp better the overall customer journey, consumer goods companies can leverage more with less money.

Seeing your data stand out from the rest raises important questions and gives you an essential tool to backup your arguments

Starting this summer, we have had the first customer deployments of our Peer Benchmarking service, and the feedback we’ve received has been helpful. We are continuously developing our product further to encompass all the different needs of our client base. Seeing your actual data benchmarked with your peer group gives you tremendous insights to know how you are doing compared with the rest. Drilling down and slicing and dicing the data is instant and effortless like with every other Sievo product. Next time, going into a performance meeting or when pitching a new idea, you don’t have to rely only on your internal data but bring more power behind your plans with an actual view of the market and your competition.

These are just a few details we have found in a small time frame. Our Procurement benchmarking solution is a first-in-class real-time benchmarking solution for all procurement sectors around the World.

Want to hear more? Check out sievo.com/procurement-benchmarking or book a demo with our experts!

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