In the 1930s, scientists discovered and started to measure the significance of invisible matter making up large amounts of the universe and everything around us. We have since learned that 96% of the actual universe is not visible and that it is comprised of 21% of “Dark Matter” that we cannot interact with.
It is a concern that many companies have a similar proportion of “Dark Matter” in their spend data — spend data that passes under the radar and is not addressed by procurement. Few companies are aware of this issue. This “Dark Matter” is costing businesses millions of dollars annually. The primary goal of the procurement department is to acquire the best quality goods and services at the lowest possible cost. However, procurement departments are not able to drive lowest possible rates if overall enterprise-level spend or volume is not visible to them. Here are some examples of why a proportion of companies’ spend data turns into “Dark Matter”:
• Mergers & acquisitions classically lead to a fragmented view of spend data. Most businesses do not look at their non-strategic supply relationship as a priority.
• Multiple transaction processing systems – ERP, Legacy, Paper, T&E and PCard – create a complex data landscape, and the lack of translation between systems and analysis makes it difficult to consolidate the 3rd party supply spend at an actionable level.
• Duplicate and inconsistent item descriptions and vendor names in the master data and misclassification often mean that opportunities to leverage volumes are missed.
• No linking of transaction data with account, contract and PO data can lead to missed discounts/rebates and wrong pricing.
If you put the above examples together, many companies will reach up to 20% of spend data that is not visible for procurement. Most companies with procurement teams can achieve an average of 4-5% annual savings, so it is effectively costing businesses up to 1% point every year they do not address the “Dark Matter” in their spend.