Supply Excellence — Garbage in => Ammonia out

Garbage in => Ammonia out

October 17th, 2008 · by Justin Fogarty · No Comments · best practices, events, spend analysis

The electronic world can only get so far on automation, as I was reminded yesterday at the Seattle Spend Management Day. Brian Jones, Purchasing Operations guru at Nestle, discussed the opportunities, process and results from their efforts to categorize spend in order to identify low hanging procurement fruit and drive ongoing spend management initiatives across the company. Despite a comprehensive database of categorized spend spanning back 3 years, answering a “simple” question such as, how much do we spend on “X”? is not quite as simple as it sounds. Brian’s interesting story shows why you still need human expertise - not just to buy the proper goods & services - but to categorize them.

A colleague who asked Brian to look into how much ammonia Nestle purchases. Sounds straight forward enough, right. I mean, ammonia is just 2 simple ingredients from the periodic table (one part nitrogen to 3 parts hydrogen. Mix. Repeat). Turns out, not as easy as it sounds.

Data mining for “ammonia” didn’t bring back the data for “refrigeration gases”, which may seem like an obvious omission to the engineers and chemists who work with it, but is likely overlooked by procurement professionals. Turns out that these “refrigeration gases” actually make up a huge portion of Nestle’s “ammonia” spend. But if Brian hadn’t had the sneaking suspicion that his legacy purchasing data wasn’t quite up to snuff and hadn’t worked with his colleague to make sure their queries covered some of these incorrect data entries, they’d have missed a substantial piece of low-hanging-fruit.

The bottom line is your category experts’ role isn’t done at the point of sourcing and procuring. Their expertise down the road in categorizing spend is essential…unless you’re procurement team consists of experts in temp labor, commodities, chemicals, transportation, and everything else your company purchases.

Justin Fogarty is Managing Editor of Supply Excellence. For any questions or feedback on the blog or its contributors, Justin can be reached at jfogarty[at]ariba.com.

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