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Why is Spend Visibility Important?

Jul 5, 2017

Earlier, procurement was considered an irrelevant purchase function. But big data analytics and spend visibility have contributed immensely in driving procurement all the way from low to high priority. This overdose of information and a clear spend visibility has enabled procurement professionals to make strategic business decisions, thereby improving its procurement process and constantly updating the organizational supply chain.

Organizations often tend to make a mistake by allocating funds without the right data and spend visibility thus sending the company’s budget down the drain. That is when spend analysis came to procurement’s rescue. Spend analysis has helped the organization to gain true spend visibility across geographies and different silos thereby identifying and evaluating expenses throughout the supply chain. Spend analysis is a process where the expenses of an organization are collated, classified and analyzed to reduce the overall procurement costs. If done properly, it can prove to be extremely beneficial to the business and contribute to the organizations topline. Read more about how spend analysis can benefit your business.

Understanding the Importance of Spend Visibility

It is essential for the organizations to have a clear picture of where exactly they are investing their funds i.e. to have a clear spend visibility. But in reality, organizations seldom engage in spend analysis activities in order to have a distinct spend visibility. It is important that the businesses carry out spend analysis in order to enable an efficient spend management. For several organizations, managing their indirect spend categories is an opportunity to create significant savings. However, it is viewed as a challenge that cannot be conquered. In order to facilitate spend visibility, identify and analyze the indirect spend categories, the organization requires to invest in spend analysis solutions, thereby initiating better procurement practices. A good spend visibility tool or methodology will assist in identifying the areas to drive cost saving opportunities, thereby creating an efficient supply chain. The areas where costs can be saved are,

  • Analyzing categories will deliver insights on the organizations total spend. Gaining spend visibility will help them to identify those procurement categories where excess money is being directed. This means that the organization is paying in excess to the value derived from it.
  • Spend analysis of the suppliers can help identify the best deals and prices offered by them which is beneficial to the business. Therefore, the organization can establish long term relations with few but highly efficient suppliers.
  • Planning and maintaining optimum levels of inventory and placing orders in advance help the procurement professionals to enjoy low prices as a result of little or no demand as opposed to a peak period where every supplier will overcharge due to excess demand.

By focusing on these areas, the organizations can facilitate cost reductions which will create a positive impact on the organizations balance sheet. This is indeed a wakeup call for the companies. Spend visibility and analysis is not just restricted to identifying and understanding the expense pattern of the organization but it assists in drawing meaningful insights and categorizing data patterns to devise effective sourcing and procurement strategies.

To know more about spend analysis and benchmarking

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