Companies across the globe are grappling with economic uncertainty, continued supply chain disruptions and in many cases, sharp top-line declines.
These converging factors are compounding pressure on companies to dramatically improve their value chain’s resilience—to better respond to future disruptions so they can boost revenue while eliminating cost that doesn’t deliver value.
As the gatekeepers of a company’s third-party relationships, procurement organizations are in a unique position to influence a wide range of value levers, while helping the company grow and improve resilience and responsibility. Consider, for instance, a company’s multi-tier supply base, which influences a supply chain’s ability to follow shifts in demand and react to disruptions. The supply base is also key to corporate responsibility. A company may succeed in containing CO2 emissions or ensuring inclusion and diversity, but what about its suppliers? Procurement can use its position of influence to ensure responsibility and sustainability across the supply base.
What’s the solution? Closed Loop Spend Management (CLSM), a more proactive approach to managing third-party spend. CLSM provides visibility and analysis and puts in place the infrastructure to help sustain savings and build resilience and responsibility over the long term.
CLSM is designed to help drive end-to-end transformation to achieve and sustain breakthrough value. This approach accelerates cost takeout with a zero-based mindset, unlocks new value with data-driven insights, makes responsibility and sustainability part of a company’s DNA, positions companies for enduring growth and prepares them for what’s next.
Accelerates cost takeout with a zero-based mindset
In times of market disruption, companies need to preserve cash liquidity. CLSM uses analytics, proprietary market intelligence, and team-based sprints to identify and help execute quick wins for optimizing spend and reinvests the realized value across the organization.
Unlocks new value with data-driven insights
In Accenture’s experience, companies can generate significant new value through spend management innovation. CLSM extracts deep savings from direct spend and indirect spend, while optimizing inventory and connecting processes by moving to a data-driven procurement operating model that can help drive longer-term transformational projects.
Makes responsibility part of a company’s DNA
CLSM embeds responsible practices across procurement – to ensure sourcing is sustainable by design. It provides visibility into ethical, carbon-neutral, and circular economy supply solutions, while reducing waste and risk, and considering social impacts. With this visibility, companies can build trusted and transparent value chains.
More effectively manage change for enduring growth
Companies have limited resources to make many urgent, important changes. CLSM gives leaders full control over how quickly, and how much, they transform their operations and implement the organizational change – with the people and in the processes – to help achieve their long-term growth goals.
Prepares companies for what’s next
To be future-ready, companies need to work leaner, smarter, more flexibly, and collaboratively. CLSM employs a human + machine model for more intelligent automation, data-driven decision making, and seamless operations.
Accenture has developed a robust, agile and iterative model to help companies implement a CLSM approach so they can begin generating value in just a few weeks and sustain that value over time. This model includes two core elements: spend transformation and new ways of working.
If the current environment has taught us anything, it’s this: What’s now “normal” is truly different from even a year ago and companies need to react accordingly.
Spend transformation: optimizing procurement's value
How a company manages direct and indirect spend has historically been the procurement organization’s primary focus—and in some companies, procurement still focuses on driving “committed value” from third-party spend. In other words, procurement negotiates the best possible terms from suppliers, puts in place the relevant contracts and buying channels and trusts the business to use those appropriately.
Some forward-looking procurement organizations have moved beyond “commitment to value” and are working closely with the finance organization to proactively manage the company’s spend. But this approach still leaves value on the table, because procurement remains focused primarily on price, which is just one of many levers that affect value.
To take the next step in its evolution, procurement needs to identify the full range of opportunities to remove costs that aren’t creating value by applying a zero-based perspective (ZBx) to all of the company’s third-party expenses.
With ZBx, a company forgets about the past and reimagines its cost base not from what it was or is, but what it should be if the company were to start from scratch—and then uses the resulting savings to fund investments in innovation, distinctive capabilities and specific activities that drive growth.
New ways of working: optimizing the organization
This transformation depends upon bringing together procurement, finance and the business to collaborate, communicate and make insight-based decisions about the full range of savings opportunities. Doing so “closes the loop” with planning and budgeting activities and ensures that procurement is an integral part of all purchasing decisions.
New digital tools and the skills to employ them are critical to the success of this change: Analytics, intelligent automation, AI and other frontline technologies offer a wide range of new capabilities. Many procurement roles will need to evolve to include analysis and data interpretation, while most compliance and data entry-related tasks may disappear. Building new skills, and possibly recruiting new capabilities, will be essential in sustaining the new ways of working.
This transformation will also require strong advocacy from the top. Senior executives need to reinforce the message that CLSM is a durable and repeatable process that becomes ingrained in the company’s culture and is a true decision-making and management tool that provides the visibility necessary to help align an organization around the priorities in which it will invest.
New realities call for new ideas, new ways of working and new responses. In this time of disruption, companies need to be more agile, more resilient and more responsible.
By bringing together procurement, finance and the business—with full visibility into spend and the supply base—CLSM can help companies accelerate innovation and grow in uncertain times, while answering the call for more agile and sustainable operations and supply chains.
There’s no going back—only moving forward to embrace change with a transformative approach.
By bringing together procurement, finance and the business—with full visibility into spend and the supply base—CLSM can help companies accelerate innovation and grow, while answering the call for more sustainable operations and supply chains.
Closed loop spend management (CLSM) is a new way to think about what the organization is spending. It aims to "close the loop" between procurement and supply chain management on the one hand, and planning, budgeting and other finance activities on the other. It’s holistic, transforming the whole organization and establishing new and more collaborative ways of working with digital technology, real-time data, artificial intelligence, and pervasive connectivity. It supports an end-to-end transformation across indirect and direct cost categories while boosting the efficiency, resilience, agility, and sustainability of the supply chain.
Today’s CPOs face a much more complex landscape, characterized by economic uncertainty, continued supply chain disruption, and the need to meet changing consumer values and expectations. It means CPOs need to not only optimize costs, but also boost the resilience of the value chain, while simultaneously responding to new customer and business needs–and developing more sustainable approaches to what the organization spends. What’s more, as the gatekeepers of a company’s third-party relationships, CPOs occupy a pivotal position in the future growth agenda. CLSM is an approach that lets CPOs meet all these imperatives at the same time—optimized costs plus new value plus future growth.
With closed loop spend management, companies can enhance their supply chain management in five key ways. First, they can take out cost faster and more sustainably with a zero-based mindset. Second, they can drive deeper efficiencies and identify new value with a new data-driven operating model. Third, they can make sourcing “sustainable by design”, embedding responsible practices and providing visibility into the carbon footprint of procurement decisions. Fourth, they can use CLSM’s flexibility to support their own pace of change—a crucial capability in choosing the right time to make a pivot to new sources of growth. And finally, they can drive forward with the intelligent automation and data-driven decision making they need to work leaner, smarter, more flexibly, and more collaboratively.
Accenture has developed a robust and iterative model to help companies implement a CLSM approach. Its agility and speed mean they can begin generating value in just a few weeks—while its robustness means they’ll sustain that value over time.
The model has two core elements. The first, spend transformation, focuses on optimizing procurement’s value by re-examining expenditure through a “zero based” lens. The second, new ways of working, looks to bring procurement, finance, and the rest of the business together in a new operating model that uses digital technology and intelligent automation.