What is Spend Analysis?

In simple words, Spend Analysis is a process of categorizing the spend in the procurement life cycle by grouping, classifying, and analyzing direct/indirect materials across the organization. Spend Analysis helps in increased procurement efficiency, optimized supply chain costs and enhance vendor relationship.

Steps in Implementing Spend Analysis

The process of implementing Spend Analysis is classified into four core steps:

• Identify Data sources and opportunities for improvement
• Analyze existing materials data, Cleanse and Enrich with accurate information
• Classify Data, and apply an industry standard taxonomy
• Review and improve

Achieving effective Spend Analysis is possible with accurate supply chain data and by performing the aforesaid activities to visualize spending patterns.

• Identify Data sources and opportunities for improvement
  • Gather all spending sources inside the organizations such as accounts payable, e-commerce and maintenance.
  • Make sure the materials data stored in centralized system and in a single format across functions especially the currencies and the value.
• Analyze existing materials data, Cleanse and Enrich with accurate information
  • Another important aspect is to have the MRO data cleansed and enriched with accurate descriptions, prices, UOM and part numbers. The level of data standardization defines the efficiency of spend analysis and be helpful in taking strategic sourcing.
  • The next step should be categorizing the data based on source of supply using previous buying transactions and supplier groups.
• Classify Data, and apply an industry standard taxonomy
  • Classify spends based on standard classification systems such as UNSPSC, eClass, ETIM or any other industry standard classification with details breakup of application and materials.
  • Analyze spends and identify opportunities for performance improvements such as reduce unnecessary costs, better negotiations with suppliers. Also, it can help you decide whether to appoint a dedicated category manager to manage vendors, and optimize sourcing spends.
• Review and Improve: Finally review the process if you are achieving your goals if not improve and implement again the strategy in the process and make sure that timely decisions are taken to change process per business needs.

Benefits of having Accurate Spend Analysis

• Optimize Cost savings and Increase profitability
• Eliminate supply chain risk and enhance vendor relations
• Better control over supplier network and extended sourcing capabilities beyond boundaries
• Enforces higher Data Quality across ERP, CMMS/EAM systems to precisely measure spends across functions

Talk to one of Spend Analysis specialists to understand what opportunities lies ahead in your supply chain and procurement lifecycle.