Spend Analytics help organizations enhance their supply side performance by integrating data from multiple channels, thereby enabling executives, procurement managers, and respective stakeholders to make more informed decisions.
Studies indicate that on an average only half of the overall procurement spend is visible to procurement heads. Besides, there are other challenges in collating and analyzing the data such as:
- Data spread across multiple systems
- Quality issues in data pools
- Inadequate analytical resources
- Lack of technological support
The analytics process involves collection of data from multiple sources within an organization. Generally, the sources include ERP systems, contracts, invoices and P-cards.
Before analyzing the data in possession, procurement professionals should have clarity on the reporting requirements. If the objective is clear, only then the output would serve its purpose. Therefore while providing spend data to a solution provider, they should be briefed on the end purpose of the report.
Also, providing inputs on spend classification makes categorization easier. It helps the analysts make recommendations based on the interpreted data. Procurement personnel can accordingly focus on strategic sourcing opportunities and category management.
Analytics can also help in understanding the purchasing trends and spend consolidation of key suppliers. This will support category managers in creating procurement strategies for their respective categories.
Spend analytics tools
There are various spend analytic tools to evaluate the organizational spend. Based on the results, a roadmap can be developed to optimize the procurement process.
Service providers can help in setting up dashboards to identify and utilize savings opportunities. Dashboards enable spend analysis by materials, suppliers, business locations, supplier locations and contracts.
Procurement managers can also analyze negotiations, supplier responses and accordingly identify trends and look for savings opportunities. They can use scorecards to assess supplier performance in terms of price, delivery and quality.
Depending on the amount of data, procurement professionals can choose from a range of software tools with features such as automated classification mechanism, misspelt data handling and month-on-month price tracking.
Cost components for realizing the analytical benefits
Spend analytics does incur costs for procurement heads in terms of implementation, technology, tools and analysis. They may choose to appoint a professional service provider or set up an internal analytical team to manage the spend. These costs should also be considered to reflect the overall cost of a spend solution; they are usually transparent and easily accounted. Generally costs include external service providers’ consulting fees and establishment costs for internal resources.
Benefits of spend analytics
- Brings spend transparency into direct and indirect spending across the accounts. This helps in identifying opportunities for consolidation and cutting down costs
- Provides visibility on operations, finance and procurement
- Identifies maverick spending
- Timely analysis of spend and communicating it to procurement managers
- Assess travel-related expenditure