Deliver more, with less. This is the challenge that almost every industry is facing today. If you are looking to maximize profits or cut costs without compromising on the quality of goods or services delivered to stakeholders, spend analysis should be your all-important first step. It provides insights into your spend data and helps you cut costs through your supply chain. It helps you make informed decisions on fine-tuning processes within your organization. It helps you decide the right direction and momentum while implementing a new solution or system.
Spend analysis gives detailed information about your organization’s procurements and expenditure, which can help you in identifying areas of cost reduction and process improvement. And if you can bring down the procurement cost of goods and services, you can very well reduce the overall cost of supply chain operations.
How can supply chains benefit from spend data management?
- Spend analysis gives an overall picture of the money spent on purchasing (materials and services) and suppliers as well as the return on investments. This information can be used to improve procurement processes and prune supplier lists to ensure fair returns from procurement spends.
- Organizations opting for spend analysis need fewer full-time employees for their procurement processes as well as fewer vendors per purchase. A streamlined procurement process allows cordial relationship with a smaller number of key suppliers and also brings down the number of employees needed to source and purchase materials.
- With spend data, organizations perform better on several other procurement parameters such as the procure-to-pay cycle and procurement cycle cost per purchase order.
- In-depth information on vendors’ annual revenue and credit scores can help organizations better understand the overall supply chain failure risk.
- Spend data can indicate categories with too many suppliers and no contract in place, and thus help with supplier relationship management and supplier category management.
- With all data in one place, it makes collaborative efforts more strategic, rather than reactive and ad-hoc. Spend data facilitate identification of common suppliers and categories, and opportunities to collaborate, which can lead to high savings.
- Procurement teams are often criticised for not spending enough with local businesses. The fact is that this happens because they do not know how much is spent with local businesses. Accurate spend information from all geographies can help the teams in making the right decision.
- The spend analysis solutions assists in benchmarking and comparing against similar organizations across the country. The data equip you to respond to queries — such as spend by category, average number of vendors or vendors generating the highest aggregate revenues. It won’t be possible to answer such queries with these kinds of responses if one were using financial management systems.
No doubt the success of any supply chain management is largely dependent upon the ability to organize and analyze spend data. Even other business functions, such as budgeting and planning, inventory management, and product development, too depend on spend data.
A timely, accurate, and detailed spend data provides intelligence on spending patterns, inventory status, compliance and performance ratings. Such insights are crucial in identifying cost-saving opportunities and formulating planning, sourcing, product, and budgeting strategies.