Most businesses, especially those with a business model that has a substantial purchasing element, can benefit from the implementation of a spend analytics system.
Spend analysis is a process in which purchasing expenditure data is collected, organized, and analyzed in order to spot areas of wastage and inefficiency and improve them.
Read More:- AI in Procurement
Spend analytics are the tools that are used in order to perform spend analysis. In the past, most spend analysis was done manually with paperwork or spreadsheets. However, in the modern business environment, there are now custom software solutions that do most of the work, making the process faster and more accurate.
Some of the benefits of using a good spend analytics package are:
1. Greater Bargaining Power. Often, it is the case in companies that different departments or branches may be purchasing from the same supplier, or from suppliers that are linked or are owned by the same parent company. With the correct data at hand, suppliers can be shown just how much is being spent with them overall. This often leads to improved pricing, especially if the requirements are consolidated and ordered via a single channel or covered by a single agreement. Read More:- Purchase Price Variance
2. Consolidation of Suppliers. Analyzing exactly what is being bought from who often reveals that same or similar items are being purchased from different suppliers by various departments and branches within the company. Proper use of spend analytics tools will reveal the best supplier(s). This allows for a reduction in the overall number of suppliers, making the purchasing process simpler and easier to manage.
3. Better Compliance Management. By analyzing where all buying activity is originating from, departments or individuals that are not following procurement rules and guidelines can be easily identified and corrective action is taken. Aside from the cost savings, this significantly reduces the exposure of the company to the use of unauthorized and unqualified suppliers. With increasing attention being paid to Corporate Social Responsibility, this can be a very effective contributor to keeping your organization out of the news headlines for the wrong reasons.