So far in our Spend Analysis Series, we’ve covered Where to Begin in the process, and the Types of Data you’ll be looking at when you go to analyze spend with the goal of launching cost reduction initiatives. This leads us into the next challenge, which is how to deal with decentralized spend. When considering strategic sourcing for a category, decentralized spend typically means that a supplier relationship (and subsequent payment to that supplier) does not flow through a single point of contact or group, such as a cen­tralized accounts payable team and payment process. Instead, employees out in the field or at satellite locations are able to place, pay for, and process orders for goods and services without oversight from a centralized entity.

This ties into spend analysis in several ways. First, if your company has grown by acquisition, it is possible that different sites utilize different ERP sys­tems. These systems may or may not roll into a single financial system.

Second, when the responsibility of ordering and paying for goods and ser­vices falls to multiple people (or groups of people), it usually results in a variety of procedures being used to actually pay for goods. For example, some locations might run all purchases through a purchase order system and pay via check, while others may pay via a purchasing (credit) card, and others may receive invoices and pay via electronic funds transfer. Depending on your situation, it may be a good idea to enlist the support of the finance department, the IT department, or both. If you are dealing with a situation in which multiple ERPs are used, finance can give you a good indica­tion of how those systems interact with each other. Finance can also shed light on the types of payment options that are used within the organization and how those options are reflected in various ledgers and reports.

IT should also be able to help run the reports you need and provide assistance in standardizing and consolidating data sets com­ing from different sources. If some payments are going to vendors through a procurement card (p-card), the transactions you pull out of your ERP are only going to reflect payments to your p-card company, not the vendors you were actually paying. However, most providers of p-cards can give you reports that detail whom you have paid with their cards. These reports can be as simple as a list of suppliers and total amounts, or as detailed as a line-by-line account of particular items purchased and quantities.

If you do not already have access to this data, finance should be able to provide you with the appropriate reports. When working with IT or finance, remember that during this first pass of data collection you are simply trying to identify total spend by supplier over a period of time, normally a year. Two to three years might also make sense if one of your goals is to identify trends over time.

For further support in wrangling in decentralized data and performing a spend analysis, contact a Spend Consultant. These firms specialize in spend analysis and can provide a fast and comprehensive view of your organization’s spend profile.
Share To:

Strategic Sourceror

Post A Comment:

0 comments so far,add yours