To manage your spend meticulously, you need to see them first, and then analyse and understand the patterns. For many organizations, gathering spend data from across the company is a headache in itself. Having a proper classification and analysis of this data of all company-wide purchases and vendors is desirable, but often elusive. You will gain a great advantage to negotiate contracts and optimize your costs if you have the complete perspective and right insights into your company’s total spend, supplier groups, spend comparison with your close competitors, price variations etc. Speed of analysis and reporting with reliable accuracy in classification is of prime importance here. This will help you also to identify potential risks in your supplier network and to achieve sustainability and optimum diversity.
Spend analysis has come a long way. It can do much more than just identify cost-savings opportunities for analysts, category managers, and consultants. With improvements in data classification, enrichment, visualization and analytics, spend analysis has emerged as a tool that can bridge the analytics gap between a business and its supply chain operations.
Organizations that opt for spend analysis program enjoy benefits of cost effectiveness, process efficiency, and greater staff productivity along with efficient procurement operations and robust supplier relationships.
How spend analysis can help supply chain operations
- Spend analytics can improve supply-chain efficiency and reduce costs by enabling better management of supply-chain sourcing.
- In terms of sales and marketing, it can provide insights into price-point, revenue-leakage, revenue-driver, demand/price-elasticity and customer-retention. In supply chains, it helps with sales- and finance-linked forecasting and new product introduction profitability.
- At the operational level, analytics-focused initiatives can add value through better inventory management and greater customer experience. At price points and margin yields, analytics can help in influencing profitability.
- Spend analysis gives an overall picture of expenditure on purchases (materials and services) and suppliers as well as the return on investments (RoI). This information can be used to modify procurement processes and supplier lists to ensure maximum RoI for the organization.
- It also facilitates improved supplier relationship management and supplier category management which help organizations to establish leaner and more efficient procurement functions.
- Streamlined procurement functions allow organizations to build strong relationships with a smaller number of key suppliers and reduce the number of employees needed to source and purchase materials. Organizations with spend analysis also have fewer vendors in their master files.
- Organizations with spend analysis also perform better on several other procurement parameters such as total cost of procurement cycle per purchase order and procure-to-pay cycle.
- Spend analysis helps businesses identify areas where they can better implement an eProcurement system and PCards. It is helpful in tracking useless spend or spends in categories where there are too many suppliers, but no contract in place.
- An in-depth information on vendors’ annual revenue and their standing in the market helps in better understanding an organization’s overall supply chain strengths and weaknesses. Up-to-date spend data facilitate identification of common suppliers, common categories and make collaborative efforts more strategic, rather than reactive and ad-hoc. An opportunity to collaborate minimizes expenses and allows more savings for an organization.