Importance of Spend Analysis

Spend analytics can deliver big benefits to any corporate organization. Spend analytics can help in gaining visibility to the spend data. It can help to dive deep and track the metrics of procurement performance to provide some actionable insights that can help to identify the opportunities for the process of consolidation to the spends. This will help in reducing the cost of procurement.

Spending of any organization is highly concealed with limited visibility, especially the spending data of decentralized organizations. Organizations allow limited visibility to the fact of how money is being spent there. This can be a challenge to identify the cost-saving opportunities of the organization that can affect the bottom line of the organization directly. It is a shocking fact that 19% of organizations are having a properly automated process to spend analytics these days.

What do you mean by spend analysis?

Spend analysis a process that can help an organization in optimizing the performance of supply-side by assimilating data from the value chain of the enterprisers by enabling the executives of the organization, managers, and employees that can make well informed and actionable decisions for the betterment of the organization.

Cost reduction is being the main focus of organizations. Many organizations are spending more time on the process of spend management. They are trying to analyze their spending patterns because this can help in identifying better opportunities for savings. One aspect of this process of spend management is spending analysis. Spend analytics can help to assess the expenditure of an organization with the linked questions for example who, what, why, when, where, etc.

For a better function of the supply chain, any organization can ask the following questions to complete the process of spend analysis in a better way.

  • Are you getting what was required?
  • What amount are you spending?
  • With which supplier you are working?

Spend analysis is the best way to get remarkable visibility in the procurement spending of an organization which can help the organization to consolidate with the suppliers and spending of the organization.

Why perform spend analysis?

The following are some reasons why you should make a spend analysis a part of your organization.

  1. Better visibility on suppliers and spending
  2. Spend analysis can improve processes
  3. Spend analysis can help in managing the risks
  4. Spend analysis can help in the category level analysis
  5. Spend analysis can help in managing effective supplier relationships
  6. Tail spend management

Better visibility on suppliers and spending

With the process of spend analysis, any organization can get valuable information about the money it is spending. This detailed information can be about the spending for purchasing the material or services, suppliers who are incurring larger costs or the suppliers that are meeting the needs and expectations. This information can be very helpful in the process of modification of procurement. As a result, these changings can help the organization to adopt the new procurement analytics practices that will be more proficient for example, in managing the supplier’s relationships, to manage the category of the supplier or in the process of savings management,

Spend analysis can improve processes

Data on spend analysis can be beneficial in making informed decisions about how you can improve your processes in your organization. This analysis can be helpful in identifying new opportunities to improve the working of an organization even when the new system is implementing. For example, you are initiating a new eProcurement system or merging the accounts with suppliers. Spend analysis can be helpful to identify the new ways that can generate a superior return on invest (ROI).

Read More:- Purchase Price Variance

Spend analysis can help in managing the risks

If you are not having a proper SRM strategy and working with the same supplier for years, this can incur some risks. In this kind of situation, the expenditures of an organization can be increased beyond the fact what was intended originally. In this way, the organization may depend on the vendor for the operational supplies of the products or services.

This can be a major risk for the organization in two ways:

  • If you want to change your supplier, but your vender is dependent on your supplies, he can leave your organization and can ruin the public relations of your organization. You can face negative feedback in this type of situation.
  • If you are dependent on a vendor for your supplies and the vendor wants to leave your business due to any reason. Your organization can face the problem of lack of products or services that you want to have, and these products or services may be important for the production line of your organization.

Spend analysis can help you to assess the risk of the failure of your organization.

Spend analysis can help in the category level analysis

Spend analysis can help you to step into the spend analysis to the analysis of the category level. If you are going to adopt a category management approach, then to analyze spend data according to each category can be easier for the organization. The organization can divide each category into sub-categories for a detailed analysis. This can help them to view the overall spending of the organization to control the cost in a better way.

Spend analysis can help in managing effective supplier relationships

According to search results, organizations that are performing the process of spend analysis on a regular basis can have few vendors in their lists. This can make them able to work with preferred suppliers and deeper relations with these few suppliers. This can help when you want to reduce the number of suppliers needed to purchase the material for your supply line.

Tail spend management

Tail spend a special type of spending that is not commonly being managed in any spend category but can affect the financial performance of the organization. Tail spend automation a part of the spend analysis too.

Any program that is having spend analysis as its important part can enhance the competitive edge of any organization. This can help in making the procurement process smooth.

Contact us today to know more about how Simfoni’s technology and processes can help your organization achieve world-class Spend Analytics


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