Don’t Decide Between Spend Analytics and Contract Management Systems. Use Both.

By Robert Handfield, Dec 22, 2015

I have been interviewing a number of Chief Procurement Officers on the subject of procurement analytics and predictive analytics. An issue that frequently comes up is the debate over spend analytics and contract management systems. For organizations in the early stages of procurement transformation, which ones are more critical? And how important are systems to driving change?

One executive I met with stated it very succinctly: “Systems help build the level of credibility – through fact-based analysis – which allows the organization to benefit from the rigor and analysis you bring to the game.”

But which one is more important – understanding your level of spending, or where your contracts lie? The answer: both.

“I think obviously you need to figure out what your roadmap is for spend analytics and contract management. I think both of them are key in the evolution. Spend points you in the direction of where there is fragmentation and where you want to drive supplier consolidation. But understanding what contracts you have out there, provides the details around the service descriptions, and what is contained in those relationships with suppliers.

“The spend analytics gives you the idea on WHERE the opportunities are – and while contract management gives you a list on where to prioritize your efforts in the short term, and make your team more efficient, it is much more efficient to work collaboratively within a tool that allows you to engage your clients from a stakeholder management perspective. And it also lends itself to an efficiency component around workflow management, and a risk management component on top of that, and eventually leads to a standard process that people throughout the organization come to agree on.

“Once you can put your contracts into the system, you start to also drive standard processes around monetary approval of spending. This is a big challenge for many organizations… who is going to release and approve agreements? Establishing certain protocols around data privacy concerns for specific agreements and certain types of engagements can be complicated.

“But spend analytics and contract management are the tools I like to lead with…ideally deploying them together. Spend gives you the direction on WHERE, and contract management systems tells you HOW.”

This post originally appeared in Robert Handfield’s Supply Chain View from the Field.

About the author

Author photo

Rob Handfield is the Bank of America University Distinguished Professor of Supply Chain Management at North Carolina State University, and Director of the Supply Chain Resource Cooperative. He also serves as an Adjunct Professor with the Supply Chain Management Research Group at the Manchester Business School.

The SCRC is the first major industry-university partnership to integrate student projects into the MBA classroom in an integrative fashion, and has had 15 major Fortune 500 companies participating as industry partners since 1999. Prior to this role, Handfield was an Associate Professor and Research Associate with the Global Procurement and Supply Chain Benchmarking Initiative at Michigan State University from 1992-1999, working closely with Professor Robert Monczka.

Handfield is the Consulting Editor of the Journal of Operations Management, one of the leading supply chain management journals in the field, and is the author of several books on supply chain management, the most recent being Biopharmaceutical Supply Chains, Supply Market Intelligence, Supply Chain Re-Design and Introduction to Supply Chain Management (Prentice Hall, 1999, 25,000 copies sold, and translated into Chinese, Japanese, and Korean). He has co-authored textbooks for MBA and undergraduate classes including Purchasing and Supply Chain Management 5th revision (with Robert Monczka) and Operations and Supply Chain Management 2nd revision (with Cecil Bozarth).

Handfield received the Emerald Citation of Excellence award in August 2011, for an article cited as one of the top 50 articles from the 300 top management publications worldwide that have had a proven impact since they were published. In 2009, he was nominated as an Honorary Fellow of Contract & Commercial Management (FCCM) by the International Association of Commercial and Contract Management. This honour is bestowed on individuals who have made exceptional contributions in the field of contracting and commercial management. Handfield is regularly quoted and has published op ed pieces, and is quoted in blogs and global news media such as the Wall Street Journal, Financial Times, the San Francisco Chronicle, Spend Matters, Microsoft Live, Ariba Live, Inc., CIO, CFO, the Supply Chain Management Review, and other media.