Why is Spend Management Important in the Fashion Retail Industry?
Tracking, analyzing, and controlling spend is imperative to understanding and efficiently managing the costs, expenses, profits, and savings of any business. In the fashion retail industry, novel trends, target markets’ changing preferences, and raw material costs have significantly changed the approach to procurement, production, and sales, leading to the increasing need for spend management. This process provides companies with the necessary data to make well-informed decisions regarding expenses, mitigate maverick spend, increase profitability, and keep pace with all monetary and major financial changes within the system. Supply chains are highly complex systems, and companies in challenging and competitive markets such as the fashion retail industry require a well-constructed spend management strategy to efficiently approach their expense planning, minimize monetary losses, increase savings, and improve stakeholder satisfaction. The fashion retail industry has transformed significantly due to the advent of sustainable practices, the demand for eco-friendly options, and consumers’ rising awareness regarding fair and just practices across organizational levels. Meeting consumer demand can be challenging while attempting to control expenses and efficiently manage spend, which has led to an urgent need for spend management in the fashion retail industry.
What are 5 Key Benefits of Spend Management for Fashion Retailers?
Real-Time Visibility: Keeping pace with the rapid changes, constant expenses and transactions, and fluctuating costs within a company can be challenging. To maintain efficiency, companies must be aware of the costs incurred, transactions completed, and payments made at all times throughout the company. This practice helps minimize the possibility and impact of fraudulent transactions, unnecessary losses, and unexpected expenses. Spend management helps companies utilize data systems, analytics, and efficient reporting structures to maintain real-time visibility regarding all financial activity within the company. Subsequently enabling data-driven monetary decision-making, increased trust and honesty, and improved visibility for stakeholders and managers.
Accurate Data: Every system, process, and department within a company is an untapped source of data, analytical resources, and crucial information, if effectively assessed and understood. However, to leverage the strategic and sustainable value of this data, companies must ensure the data is carefully scrutinized, reconfirmed, and can enable accurate insights. Spend management is process that encourages careful analysis of all data, open communication between parties, and a comprehensive understanding of the possibility, impact, and importance of various financial changes. This provides CPOs, managers, and stakeholders with the insights required to cross-check and assess the accuracy of the data procured, and consequently develop accurate and efficient strategies.
Improved Risk Management: The supply chain is a large, complex system that requires constant scrutiny, planning, and preparation, particularly when it comes to market, supply chain, and supplier risks. These risks can vary from minor inconveniences to causes for major losses, inefficiencies or future challenges. Spend management helps companies identify, evaluate, and mitigate many financial and monetary risks through preemptive measures and centralized systems. This process can help companies reduce maverick spend, identify and deter fraudulent purchases or practices, and ensure that the systems require approvals before any transactions are made. Additionally, companies can use this system to track suppliers’ performance, ensure compliance, and provide necessary insights regarding audit requirements and reviews.
Operational Efficiency: Maintaining a robust, resilient, and efficient supply chain is imperative to the growth and success of a business, and spend management helps companies achieve that with ease and accuracy. Companies often struggle to maintain operational efficiency due to various financial challenges, uncertainties, and unclear systems. Spend management addresses these obstacles by increasing automated processes, minimizing time and labor required, reducing cycle times, and avoiding potential mistakes such as duplicate payments, late payments, or repeated purchase requests. It also provides various departments with clear spend policies and systems, minimizing potential bottlenecks, and increasing transparency and accuracy across the company.
Increased Profits: Staying ahead of the market, minimizing costs, and maintaining efficiency is extremely challenging while attempting to increase profitability and sustainably grow. Understanding the company’s financial targets, strategic requirements, and business expectations can help professionals significantly propel profitability. Spend management helps companies achieve the same, while simultaneously, eliminating maverick spend, minimizing fraudulent practices, and negotiating improved terms for partnerships. Additionally, with the necessary data and clarity, companies can reduce costs by maintaining necessary and profitable partnerships, eliminating unnecessary contracts, optimizing capital and investment, and understanding the ideal prices in the market, consequently boosting profitability and success.
As consumers become increasingly aware of environmental challenges and the need for sustainable practices, companies in the fashion retail industry have witnessed a drastic shift in the approaches to marketing, sales, and product development that improve customer attraction and retention. Additionally, companies are struggling to maintain low costs and high profitability as the costs of sustainable alternatives rise, and novel marketing campaigns and initiatives require significant investment. Attempting to overcome the same challenges, a fashion retail industry player based in North America sought to partner with SpendEdge and identify the reason for a sudden decline in savings and profitability, and unexpected increase in costs. Our experts worked closely with the company’s relevant departments to identify the sources of increased costs, and potential ways to minimize unnecessary expenses that may be incurred due to inefficient systems. The experts also provided the company with actionable insights and recommendations into the effective use of a spend management strategy, and enabled the development of a well-informed and data-driven approach to spend management within the company. Consequently, the company mitigated unnecessary costs, identified challenges and shortcomings within their system, improved profitability, and substantially increased savings while keeping pace with the changing trends and consumers’ demands.