Spend analysis tools, although not new, can help procurement teams work more effectively. Every procurement team knows about these tools and uses them to some extent to capture a certain degree of cost savings. But even companies that claim they are taking advantage of spend analysis aren’t using it to its fullest extent, which is not only unfortunate but is actually putting their companies at risk.
The effective use of spend analysis can have a significant impact on a company’s profitability and operating margins by enabling intelligent planning, forecasting, budgeting, and risk mitigation.
Advantages along with cost savings
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Advance overall data management and quality
When companies opt for spend analysis solutions, they have a more effective way to collect, store, and manage the enormous amount of data they have from all their various sources. They will integrate data from ERP and other financial systems into one centralized location, which helps close the gaps between disparate enterprise systems, especially when they are located all across the globe. When data is converged as a single source of truth, the procurement staff has quick and easy access to it, allowing them to acquire a better understanding of current and historical spending habits, trends, and patterns. It helps them gain deep, insightful intelligence into the how, where, why, and with whom of future spend.
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Enhance supplier management
Using spend analysis effectively, companies get the spend visibility they need to identify and leverage opportunities with vendors and reduce risk. For instance, they can identify duplicate vendors and consolidate and optimize the number they work with by determining which vendor opportunities are the most valuable and cost effective. Spend visibility also helps control spending related to non-approved suppliers. Additionally, companies gain the ability to align with suppliers that encourage diversity in their organizations. Spend analysis can also identify companies that have same or varying payment terms and can encourage suppliers to transact electronically.
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Improve product categorization
Once there is a single source of truth, companies can gain a higher degree of visibility into their spend, because diverse groups of products are easily identified and categorized within industry standards and customized taxonomies. For instance, it’s through this kind of advanced categorization that organizations promoting diversity can be identified. This kind of consistent and intelligent classification uncovers insights – such as spend patterns and trends – that reveal the true value of spend analysis data and allow for faster decision-making.
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Identify commodity spend trends
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Pinpoint risk associated with commodities
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Accelerate planning and forecasting, regulatory compliance, and the management of complex projects and contracts
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Facilitate internal and external process compliance with best practices and regulatory requirements