Spend analysis is undoubtedly an essential function of procurement in a business. Spend analysis, when correctly performed, can lead to insightful findings and better savings, and often act as a catalyst to drive business decisions for a company. Using a spend analysis solution allows companies to uncover the hidden potential lying within their data. Businesses can empower their team with business intelligence to make discoveries that can quickly grow the sourcing pipeline. However, procurement teams implementing a spend analysis solution can often face several challenges and roadblocks. Here are four of the critical challenges that we think procurement teams must overcome for undertaking spend analysis successfully:
Cleansing the data
The tasks to extract, cleanse, classify and normalize spend data should not be underestimated. Traditional, rules-based approaches to cleansing and organizing spend data can be time-consuming and may introduce inconsistencies if carried out manually. Automated methods may be quicker, but exceptions will undermine completeness, and therefore accuracy.
The purchasing team is of a company is often consumed with daily tasks such as buying basic materials for the organization. Spend analysis usually starts with purchasing and strategic sourcing. For this, procurement teams require IT support. Although the need for IT support has lessened significantly over the years, procurement teams still need to allocate resources to spend analysis and strategic sourcing to drive leverage across the organization.
Each group managing spend has their own systems and their own data. In most companies, for security reasons, no one person has access to all the different systems. So, if procurement teams want to pull together all the data, different people have to be approached for various data.In this case, there are chances of encountering varying attitudes and degrees of cooperation from people having access to the data. Also, in many cases, data may be incomplete, inaccurate, or even inconsistent. In a rush to satisfy a requirement, some descriptions are too brief to understand the nature of the spend; sometimes errors in coding occur; and many times the same company may be referred to in different ways. These might cause confusion and miscommunication during procurement.
Resistance to change
Spend analysis can often be misunderstood. It can represent a threat to some stakeholders including customers, contracting officers, financial managers, etc. The best way to address resistance is with education. Develop briefings to educate anyone with an interest, informing them about what speed analysis is, how it can benefit them, and how can it contribute to success.