PROCUREMENT OPTIMIZATION BLOG

Discovery

The year was 1848.  James W. Marshall was a foreman working at a lumbermill in California when he spotted a shiny nugget in the mud.  Over the next two years, an estimated 300,000 people would migrate to California not only from the eastern states of the still-new republic, but from all over the world.  Gold was the Bitcoin of its day and everyone wanted in.

But what became of all of those prospectors?  And what does a group of dusty frontiersmen 170 years ago have to do with procurement in the 21^st century? – As it turns out, quite a lot!

Just as news of the discovery of gold spread like wildfire around the globe (despite the lack of Snapchat or memes), “Big Data” and the unimaginable riches to be found mining data – a natural by-product of nearly everything we do in the Digital Age – has gripped the business world.  Companies large and small are hyper-focused on panning for savings and sifting through the noise to find nuggets of wisdom in the mountains of data accumulating around them.  In the world of procurement, spend analytics and sourcing opportunities uncovered through this process are the “next big thing.”

Does Mining Really Result in Riches?

How successful are the businesses pouring millions into the “Big Data” craze?  Do the procurement organizations making large investments into the latest Spend Analytics software package actually realize value?

Take a look at our prospector friends back in the 1800’s.  There was indeed “gold in them thar hills” – by some estimates, 750,000 pounds of gold were extracted from the hills in California during the gold rush worth around $13.5 Billion dollars at today’s prices!  Similarly, the savings hiding in your spend data are real and most organizations do have untapped opportunities for significant savings hiding in the shadows of their spend.

But getting rich mining gold wasn’t guaranteed in 1849 and it takes more than buying the latest software package to separate gold-ore from sandstone and then refine it into true lasting savings.  Some of the greatest fortunes from the Gold Rush were made by selling equipment to fool-hearty 49-ers, many of whom would never earn a cent because they did not learn how to properly use their new mining tools. Without knowing how to properly use the tools, many 49-ers joined the trend of the day without ever truly finding the gold, the equivalent of dumping a big scoop of random rocks into the latest “State-of-the-art Mine-a-tron 5000” and expecting pure 24 karat gold to pop out the other side.

Moving Beyond the 49-ers:  A Program for Success

If there truly is gold lying beneath the surface in your data centers – and countless studies and anecdotal evidence tell us that there is – how do we actually find it?  How can Spend Analytics help us drive real value and not just fill our coffers with a bunch of fool’s gold?

If your organization has never pursued a strategic sourcing initiative, simply taking a quick glance through your spend data may result in the discovery of gold (just like James Marshall on that fateful day in 1848).  But for long-term results, it takes more than just lucky accidents.  In order to be effective, Spend Analytics has to be implemented as part of a comprehensive platform-enabled procurement program, built from the ground from the right raw materials.  Like in mining gold – it’s not enough just to have any old rock.  To support effective Spend Analytics, your procurement program has to produce gold-ore – line-level detail on every transaction – that a Spend Analytics suite can then process into the gold you’re ultimately looking for.

To move beyond quick-hits and one-off savings, start building a platform-enabled procurement program from the ground up. This will not only help to identify savings through a comprehensive Spend Analytics program, but also confirms that the controls needed to ensure savings are realized through reduced spend after they’ve been identified, sourced and negotiated.

And talk about sustained results: 100 years later, California was still producing gold near the levels first seen in 1849 – the year of The Gold Rush.  So, go forward and lay your stake as you establish long-term success by excavating the mountains in your data centers. With Spend Analytics paired with line-level transaction detail, you too will find that “there’s gold in them thar hills!”

By: Ted King, Senior Manager