Monday 14 July 2014

Strategic Spend Analysis Mechanism

Authored by  Junaid Khan

The Spend Analysis mechanism works through data mining algorithms and allows the improvement of many aspects i.e. better understanding of spend patterns, identification of key suppliers spend visibility until the point of order, accurate categorization which outcomes are important savings for the company. Understanding the components of spend analysis mechanism is very important before the implementation of different other solutions. Jason Busch, Widely recognized as the leading expert on spend management wrote in a recent article about the roots of spend management technology at He noted that the initial goals of spend analysis software were to build a tool set that would include the following capabilities.
  • The ability to collect and analyze data across multiple operating units, systems, instance, and versions.
  • Advance data cleansing and analysis.
  • Common commodity classification and structure.
  •  Item level visibility.
  • The need to build repeatability and sustainability into a process versus taking on spend analysis as a onetime effort.
Many companies still do not apply strategic sourcing techniques to indirect spend categories. Instead indirect spend is treated as a series of one-off purchases, or is sourced with a simple three bid strategy with no efforts beyond reviewing the supplier price responses. Typically, with indirect spend per item prices are relatively low, the product or service is not crucial to the entailed in gathering meaningful spend and market data. Strategic sourcing allows companies to shift away from thinking about indirect spend and provides spend visibility, objective decision making and a project management tool to ensure efficient use of the sourcing team’s time and efforts.