Spend analysis is the practice of analyzing procurement spend to decrease costs, increase efficiency or improve supplier relationships. Reports generated from the analyses provide recommendations based on facts, not assumptions. Decisions can be made on how to effect changes and the strategic actions to take. Spend analyses guide category leaders and budget holders in maximizing value from their third-party expenditure and supplier relationships.
Some of the questions we can answer with spend analysis are:
- What are we buying?
- Who are we buying it from?
- Who is buying it?
- How often do we buy?
- When did we buy it?
- How much did we pay?
- Did we receive what we had been promised?
Why is spend analysis important?
Spend analyses convert raw data into usable information. They deliver insights into an organization’s procurement activities and expenditures, uncovering opportunities to lower its overall cost to procure goods and services.
We typically embark on a spend analysis exercise to:
- identify areas of opportunity to reduce costs
- improve supplier performance and manage supply risk
- streamline sourcing processes for better efficiency
- identify out-of-contract or unauthorized spending
- leverage or consolidate similar products or services
- diversify the supplier database
- identify opportunities for more sustainable procurement
- create more accurate budgeting and spend forecasts
To deliver an improved organizational performance we need to collect, cleanse, classify and analyse the spend data in multiple ways to uncover and shed light on opportunities. Besides highlighting areas for cost savings and improved supplier performance, we can make better sourcing decisions, reduce cycle times and ensure contract compliance.
Read more. This article was originally published on sievo.com