Many companies can benefit from an analysis of their corporate level purchases. With acquisitions, multiple locations, separate business units, and different practices in each part of the organization, there are easily enough product types and opportunities to find significant savings. And savings don’t only come from unit cost savings of product purchases. Services are now the focus of many procurement organizations. Currently, only 27% of services spend is being managed by procurement professionals. Significant opportunities exist to centralize services sourcing, streamline the process for service purchasing, and apply category savings levers for maximum savings.
The Aberdeen Group reports on the best practices in spend analysis after evaluating 700 enterprises. In Aberdeen's "Spend Analysis: Working Too Hard for the Money", research indicates that spend analysis delivers value. The best in class companies were found to have top management support for spend visibility, spend analysis reporting at supplier, category and transaction levels, visibility into enterprise wide spend across all categories, and standardization of spend reporting with automated data collection from multiple sources. The Aberdeen report indicated a 12.7% cost savings from sourcing activities based on spend analysis data.
However, there is still much room for improvement at many companies. The majority of organizations reviewed are still using manual processes to track supplier spending. Without proper spend analytic tools, companies are unable to identify savings opportunities due to the lack of spend visibility. Furthermore, without good spend data, companies can not properly prioritize sourcing activities and have no way of leveraging enterprise wide purchases. The main obstacles to effective spend analysis include having to rely on multiple data sources (both internal and external), poor data capture, and limited automation to get the right information when you need it. The report also mentions that companies ought to consider sourcing/procurement outsourcing services as one enabler of facilitating savings. Spend analysis is an effective technique to get at the magnitude of the potential reduction quickly. Effective data collection, data cleansing and classification, along with proven analysis techniques and category knowledge, provides for tremendous power to optimally source for savings. For more on Establish services in spend management click here. |
