Tag: spend management

spend management

Boosting Process Efficiency and Improving Spend Management for an Electronics Company

The Business Problem

The client – a global electronics manufacturer with operations spread across different Asia-Pacific regions was witnessing profit decline amid mounting macro uncertainties. The slower revenue growth in the emerging markets and the rising US-China trade tensions were compelling the client to improve spend management and mitigate challenges impacting the cost of finished products. The need to gain visibility into the spend and drive organizational value forced the client to engage with SpendEdge. The objectives they were looking to achieve through this engagement were:

  • Centralize legal entities into one procurement function and unify processes to deliver bottom-line savings.
  • Reduce capital expenditure to avoid excess inventory and quality issues impacting the spend and the cost of finished products.

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tail spend

Tail Spend Management: How is it Helping Companies to Achieve Significant Cost Savings?

Until recently, not many companies considered it an intelligent idea to extract savings from the low-volume purchases in “tail spend”. They didn’t even consider optimizing tail spend to be worth the efforts.  However, the equation is changing nowadays, especially for companies who haven’t handled tail spend earlier, there is a scope of leveraging of 5-15% savings in this spend category.

But unfortunately, companies don’t manage tail spend with the same diligence as they manage their core spend. Many times, they neither watch sourcing market trends nor do they try renegotiating with suppliers for better pricing. Thus, leaving their hard-earned money on the table and missing out a substantial amount of savings.

At SpendEdge, we understand the importance of a tail spend management process in achieving substantial cost savings. Therefore, in this blog, we are compiling the key benefits that companies should look to achieve while managing the spend.

Improving tail spend management can result in substantial cost savings. Request a free demo and know how our experts can guide you with their tailor-made solutions.

Benefits of managing tail spend

Reduces prices

The most visible benefit of managing tail spend is price reduction. As companies increase their strategically managed spend, they can achieve a one-time savings of approximately 10-15% when addressing this spend the first time and  2-5% per year in savings thereafter.  Therefore, it is advisable for companies to strategically manage atleast 80 percent of their total spend.

Increases efficiency

Consolidated supplier base decreases the number of suppliers to be dealt with and enables procurement experts to focus on contracts that add more value to the business. Increased catalogue coverage and self-service procurement are a few other ways of enabling procurement experts to invest their time in value-added activities. This improves visibility into the procurement process that can be achieved through tail spend management and results in productivity gains for procurement functions, considerably.

Wondering how tail spend management can impact the efficiency and cost savings of your organization?

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Improves compliance

Tail spend management improves visibility to drive compliance on multiple fronts. Built-in controls ensure that the suppliers onboard undergo on- and off-boarding procedures, thus enforcing all HR and security policies. Supplier payments are managed to according to the contracted norms and for every phase of the project, enforcing all rates, performance metrics, and process approvals. Tail spend management process further helps to reduce risk, while a more transparent procurement process helps with fraud prevention and detection.

How we can manage tail spend?

Since the lack of data of visibility happening due to reasons such as siloed subgroups within the same organization, decentralized policies, and high numbers of vendors makes it difficult for organizations to manage their tail spend, we have broken down the process into three easy steps:

Identifying spend:  As tail spend includes everything from maverick spend to small purchases, it’s crucial to define the spend happening within the organization.

Streamlining process: Having a centralized process that can maintain the flow of data and money, enable companies to make better payment terms with suppliers and identify strategic buyers.

Utilizing data: Organizing, classifying and analyzing spend data allows companies to gain greater spend awareness, informed purchases and decisions.

Managing tail spend can be a herculean task for companies. Get in touch with our experts and know how we can assist you in managing the same.

solar energy

Tail Spend Management Helped a Global Consumer Goods Company to Increase Productivity of their Procurement Functions

The Business Challenge

The client, a global consumer goods company, was consistently facing challenges in managing low-value and high-volume orders. Their poor supplier onboarding processes, decentralized procurement models, and ineffective internal stakeholder relationships were increasing complexities and resulting in excess spend. This compelled the client to collaborate with SpendEdge to enhance procurement efficiency and spend visibility to capture incremental savings quickly. The key objectives they were looking to achieve through better tail spend management were:

  • Improve visibility into purchases.
  • Consolidate the number of suppliers.
  • Analyze and address the prime reasons of tail spend.

 

Formulating tail spend management strategies can help companies to reduce the cost of the procurement process? Request a free proposal and access our complete portfolio of tail spend management solutions.

Solutions Offered

The experts at SpendEdge assessed various dimensions of tail spend such as category, transactional, suppliers, geography, and business units to identify potential cost saving opportunities for the client. They also identified business needs, implemented tested tail spend management methodologies, and devised effective strategies to recognize savings in their tail spend.

The tail spend management framework devised by professionals, standardized the disparate procurement process by establishing an efficient delivery model. This helped improve the tail spend management process and further aided in the identification of additional strategic sourcing opportunities for the company. The enhanced tail spend management process also enabled category managers to focus on key suppliers and reduce the number of tail-end suppliers. This helped the company to increase catalog coverage and focus on larger contracts that add more value to the business.

Want to implement an effective tail spend management framework?

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Key Findings

In a span of six months, the productivity of the company increased by 20% for their procurement functions. Additionally, the tail spend management services allowed them to control, monitor, track transactions, and prevent excess spend occurring in the purchasing process. This enabled them to better manage their total spend apart from complying with changing policies and contracts.

What is Tail Spend and How Can We Manage it?

Tail spend, or low value spend, is usually refers to the 20% of non-core transactions that lie outside the main strategic purchasing strategies. It is usually left unmanaged due to the high volume of suppliers and inadequate resources. However, the increasing pressure on cost reduction and sustained savings through purchasing are making tail spend management a procurement priority for businesses. Companies can also improve their tail spend management process with the help of following steps:

  • Analyzing tail spend data and classifying transaction data at regular intervals to improve spend visibility.
  • Implementing category-commodity specific sourcing levers such as contracts, spend aggregation and many more.
  • Increasing the compliance and efficiency of procure to pay process and reducing the transaction cost.

Still wondering how to increase the spend visibility? Get in touch with our experts and know how our tail spend management services can help you devise precise purchasing strategies.

 







IR35

Spend Analysis : Assessing the Current Spend and Improving Supply Chain Efficiency for a Medical Devices Company – SpendEdge

Spend Analysis Solution Transforms Finance Operations and Reduces Operating Costs

About the Client 

The client is a leading medical devices company, specializing in the development of medical devices, laboratory instruments, and diagnostic products. The company supplies devices to hospitals, laboratories, and clinics worldwide. The company has ingrained its place as a leader in the medical devices market.

The Business Challenge 

The future looks sharp for the medical devices industry. With global economic growth, innovations and an aging population that has a growing need for healthcare, revenue for medical devices is poised for growth. However, in this turbulent environment, companies that can shift their supply chain priorities and better manage spend will be able to deliver significant value. Moreover, the rising need for supply management and strategic cost management have urged players in the medical devices manufacturing space to leverage the use of robust spend analysis solutions. Spend analysis solutions help companies in the medical devices manufacturing space to identify the potential opportunities and deliver actionable insights into the spend data to generate improved ROI. The spend analysis solutions also address concerns about the maverick spends across the supply chain and help achieve superior supplier relationship efficiently.

The client, a renowned medical devices company was facing challenges in reducing the cost across the supply chain and managing their tail spend. While public spending has become endemic, the client realized the need to drive more competitive pricing. Moreover, the client’s objective was to adopt spend analysis strategies to identify and optimize their spend areas. Additionally, the client needed to streamline their supply chain management and subsequently maximize profits by leveraging SpendEdge’s spend analysis solutions.

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cyber security

Spend Management Solutions: A Holistic Guide for Procurement Companies

“Only a truly integrated spend management solution can fetch value for your company and result in intelligent procurement.”

Limited supply chain visibility, poor supplier transparency, new regulations, spend creep, contract management, risk mitigation, and the growing need to do “more with less” are some of the key challenges that procurement companies face. Spend creep has become one of the biggest challenges for companies today as companies are spending extensively to stay ahead of the competitors.

Unnecessary spend happens when businesses buy additional items, products or services, from suppliers that aren’t needed. Also, it happens because of misguided bid management process, weaker supply chain management systems, and lack of auditing and spend analysis. Therefore, procurement professionals need to have the right spend management solutions to tackle these challenges efficiently and effectively.

At SpendEdge, we understand the impact that spend management solutions can have on your business. And to help companies identify latent opportunities to devise strategic plans to minimize their expenditure in every category, our team of experts have provided a comprehensive guide to spend management.

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Global-Interior-Design-Software-Market_T

Spend Management: Reducing Purchase Spend for a CPG Industry Client

Engagement Overview

A leading CPG industry client wanted to address the challenges emerging due to inefficient spend management. As a result, the client wanted to leverage SpendEdge’s spend management engagement to enhance spend capabilities across their supply network and drive topline revenue growth. During the course of this engagement, the spend management experts at SpendEdge devised an all-inclusive approach which consisted of primary and secondary research methodologies.

Additionally, a detailed quantitative analysis of the various spend factors across the CPG industry client’s supply network was carried out to request proposal help them identify, evaluate, and prioritize each factor contributing to indirect spends.

About the Client

The client is a leading CPG industry player in the United States.

Business Challenge

The CPG industry player was facing difficulties in enhancing their spend management capabilities across their global supply network. Additionally, the client wanted to tactically address the burgeoning nature of their inefficient spend management system.


How did SpendEdge Help the Client?

Step 1: Collected and categorized organizational spend data

Today it is essential for organizations in the CPG industry space to collect and categorize spend data from a multitude of sources supply network to efficiently identify irrelevant sources of spend. By doing so, establishments can effectively decrease and overcome the inexorable circumstances caused by an ineffective spend management system.

Step 2: Devised a flexible spend management framework that aimed at reducing the organizational and supply risks

The dynamic nature of the supply chain called for the refinement of the CPG industry client’s spend management capabilities. The development of a proactive spend management framework required a combination of measures, which included – changes to the organization’s data management structure, superior spend management strategies, and the use of advanced spend management frameworks.


Key questions answered in this spend management engagement include

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Benefits of the Engagement

With the help of SpendEdge’s spend management engagement, the CPG industry client enhanced the visibility of their supply chain processes by establishing an interconnected relationship between different tiers of the supply network. Additionally, the client developed a holistic spend management approach. The approach accounted for major changes in organizational processes, data management, and data governance, which helped them address changes in market trends including the changes in regional and global demands.

Why incorporate spend management solutions?

With the ease of availability of advanced technological solutions like spend management systems, it is now possible for organizations across the globe to bring about massive cultural transformations as a fundamental part of their business plans. Click To Tweet

Our Findings

While leading CPG industry establishments turn to robust spend management solutions to reduce purchasing spend, they also understand that a precise spend management framework relies on the reliability and quality of the underlying spend data. This case study on spend management from SpendEdge concludes that a successful spend management system must be based on a robust data management foundation.


To know more about our spend management for CPG Industry players

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