Procurement's Toolbox: Spend Analysis

What is a Spend Analysis?

A Spend Analysis is used to derive insights about a company’s spending practices, and is performed according to the following logical structure: Spend data is aggregated from multiple sources, cleansed to fix duplicate or messy supplier names, and categorized. This categorization will ideally utilize a Procurement-Specific taxonomy, although many organizations opt to use a standard system, such as NAIC/SIC or UNSPSC.

Historically, Spend Analyses have been done manually. Modern Spend Analyses harness the technological efficiency of data science tools in order to reduce their time consuming nature. Recent strides in AI tech, for example, have considerably improved the potential forfully-automated spend classification and analysis solutions. There is also a number of Spend Analysis software tools currently on the market that allow large companies to dig deeply in to their supply chain.

Why Does Procurement Need It?

Thorough Spend Analyses provide companies with a big-picture perspective of their procurement practices. A Spend Analysis improves a company’s visibility in to its spend by illuminating supplier-base characteristics, purchase histories, sourcing trends, and overall procurement needs. With enough data, this information can be organized and viewed in a variety of ways. For example spend can be broken down by department, vendor location, or suppliers can be ordered by spend within each category.

Coupled with decades of sourcing expertise, this supply-chain intelligence becomes the foundation on which strategic sourcing practices are built. Spend Analyses allow companies to identify procurement practice inefficiencies and develop actionable solutions for cost-reduction. A robust spend analysis might shed light on opportunities for supplier consolidation and price negotiation, or enhance a firm’s capacity to ensure contract compliance. In short, Spend Analytics is the data-informed fix to a sub-optimal supply chain.

How Can Source One Help?

At Source One, our Spend Analytics team has developed a fast-paced, targeted approach to assessing opportunities and strategies for supply chain improvements. All you have to do is provide us with your disaggregated spend data, and we will clean, categorize, and load it in to our Spend Consultant tool. Our procurement-specific taxonomy organizes suppliers in to categories that are tied to straightforward, market tested sourcing strategies. Once spend has been classified, we are able to provide accurate cost savings estimates for each category.

Procurement Professionals are faced with a lot of questions that don’t have easy answers. “How much did we spend on wireless services for June 2017, and who were our top suppliers? How frequently do we make payments to our top chemicals suppliers?” Our Spend Consultant tool is a straightforward solution to finding the answers to these questions.

In SpendConsultant.com, clients are able to visualize their spend data at a high level, or in more granular detail, for example, you can view your spend data by location, Business Unit, over time, or by category. What differentiates us from other Spend Analysis tools is our Opportunity Assessment Explorer. SpendConsultant.com provides estimates for spend savings, speed to savings, and ease of implementation as well as category specific details of cost savings levers and market intelligence.

Our Spend Analytics practice not only allows you to develop detailed, specific insights about your company’s spending practices, but it also sets the groundwork for implementing supply chain management strategies. As soon as we complete a Spend Analysis, our subject matter experts are ready to execute cost-saving initiatives on your behalf.

Click on these links to learn more about Spend Analysis and Spend Consultant at Source One.