Often, companies compare their performance with similar companies to get an inkling of their operations and spend, to identify industry best practices that help improve their business and thereby create a competitive advantage. This act of organization’s comparing key metrics of operations such as spend analysis to others in the industry is called benchmarking. It is used as point of reference and a tool used by leadership and procurement teams to facilitate decision making.
Spend analytics can be defined as the process of collating, cleaning, classifying and analyzing purchase or spend data with the objective to reduce procurement costs, enhance efficiency and monitor supplier compliance. As a matter of fact, most of the chief procurement officers (CPOs) have knowledge of less than half of the overall spend as most of the data exists in multiple disconnected systems with little or no IT support and analytical resources. Spend analytics helps in transforming procurement processes by optimizing the supply chain and deriving actionable insights from the spend data.
The Who, What, When, Where, Why and How of Spend Analysis
Most of the organizations haven’t yet adopted spend management as part of their procurement activities and the most common reason for not doing so are – A) level of difficulty is high, and B) the wait for results is prolonged. However, spend analysis is not some rocket science that companies need to shun themselves from. Most of the information required for spend analysis is available through purchase, procurement, accounts and ERP systems within the organization. The bottom line is: spend analysis provides knowledge and insights to an organization on the amount it spends on purchase of supplies and materials, the suppliers it liaises with for the same and the resulting value addition to the business.
Why Spend Analysis and Benchmarking is Essential for Your Business?
Spend analysis enables the organization to gain a 360-degree view of where their money is spent, what value it adds to the business and derive some actionable insights to revise their procurement and supply chain strategies. It enables organization to gain insights into spend data visibility, cost opportunities, contract management and compliance, tail spend management, supplier benchmarking and supplier strategy development among others. Once the organization leverages this information to revamp their procurement processes and supplier relations, they can adopt other practices such as supplier risk management and category management thereby adding more value to the organization as well as suppliers and creating efficient and robust procurement and supply chain functions. The following are a few clearly marked benefits of spend analysis on your business,
- Cost savings
- Managing maverick spend
- Improving procurement function
- Positive supplier relationship
SpendEdge offers a wide range of solutions to spend analysis and benchmarking issues thereby providing granular insights on purchase and procurement activities and related spending trends.
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