Spend Analysis
Uncovering the savings opportunities, trends and patterns in your spend
Spend analysis is the underlying component in procurement to help business to analyze current spend structure to identify potential saving opportunities. The spend analysis process involves of collecting business spend data from various source to gain visibilities of direct and indirect expense, and measuring with alternative solution to unlock cost saving riddle in order to improve procurement efficiency and enhance profitability.
Collecting spend data
The first step of spend analysis is to collect available spend information for the proposed product procurement from past transaction payment and records. Usually most of the data are available in organization’s transaction system, and it is important to gather all transactional related data for a comprehensive spend analysis.
Categorize and analyze
With all the data obtained, we will breakdown the data and classify them into related categories, and calculate the cost percentage of overall spend in that sourcing project. We analyze the findings to review the current supplier pricing structure, delivery performance, product receipt quality, then to conclude the estimated savings if appropriate sourcing strategies were implemented.
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Spend visibility
Spend visibility is the result after detailed spend data analysis that it reveals the information of who we buy from, from where and at what cost, and some other related expense derived from the transaction. It developed a comprehensive understanding of actual spend cost, patterns, categories, suppliers relations. It clarify the vision of segmental spend of an organization, it allows organizations to use data to compare alternatives and identify opportunities for cost savings and sourcing efficiencies.
It is important to take into account of potential price inflation and volatility present the need for a far more realistic approach to spend analysis. Therefore, it requires to:
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Improving spend analytical and forecasting capabilities in response to increasing complexity and volatility of the business environment
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Optimizing spend processes and identify alternate suppliers to reduce the impact of price volatility.
