Tuesday 4 June 2013

Spend Analysis - It's Important to your Bottom Line

Authored by Shayda Sharfaei

Spend Analysis is a topic that is almost on every procurement professional's mind these days and this is why organizations are dedicating more time and effort to spend management, in which the spending patterns are identified and the organizations can point out the bottlenecks and increase opportunities for long-term savings.

However, organizations are often intimidated as they all know it's not an easy task. It involves a lot of data that may come from multiple sources, determining a classification system and classifying each piece of data which is usually linked to a financial transaction. But before even beginning to decide where to extract the data from, you need to consider a few factors such as what you are spending and where you're spending on and this will actually be your starting point!

Other key metadata includes categories with the most suppliers and areas where an organization is overpaying for goods or services, results in strategic ways of cost savings, identifying new areas of opportunities, mitigating supplier risks and identifying categories where purchasing should consider getting into contracts. The benefits of adopting a collaborative spend analysis doesn’t just happen, they all can only begin after the organization's spend data is transformed into a consistent, normalized format and put into a single database for analysis.

Many companies out there today are routinely performing spend analysis, but not taking full advantage of the output’s potential. It's a strategic initiative for a procurement organization and can help reduce overall procurement spend. This initiative requires a combination of technology and expertise and must be conducted as an ongoing program to ensure the continuity of saving results.


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