Spend visibility is the primary goal of spend analysis. To see where the savings are, you need a 360° view of your addressable spend. Spendata gives you the whole picture with eye-opening insights that lead to real value.
Many spend analysis projects begin by identifying the usual suspects — categories of spend that are the hardest to control and most likely to yield savings. Here is a short list of spend categories that usually fall into that category.
Maverick spenders probably don’t realize that every dollar spent off-contract represents a loss for the company. If purchasing negotiates a 10% discount with a supplier, but 50% of the expected spending is off-contract, half the potential savings are never realized.
The process of analyzing spend uncovers numerous opportunities to make system changes and improvements throughout the purchase-to-pay-process. Here are a few key business processes that depend on spend analysis to succeed.
One way to approach a spend analysis challenge is to ask: Which actions will produce the most dramatic results? This strategy leverages what's known as the 80/20 rule. For example, it follows that by focusing on the 20% of suppliers who receive the largest share of spend, you are likely to find the largest potential for savings. But don't stop there. By applying the same rule to the remaining 80% who receive smaller amounts of spend, you may find even greater savings.
The goal of spend analysis is simple: find the difference between what the organization thinks is happening with spending and what is actually happening. The spend analyst accomplishes this by searching for spending patterns that stand out or differ in some way from what he or she expects to see.
Determining the right number of suppliers for a commodity is a balancing act. Risk is on one side, and cost savings is on the other. Having a lot of suppliers can feel like an insurance policy, but it can reduce your buying power. Depending on too few suppliers can also have serious consequences. The Answer: Implement a new strategy or update the old one to get cost and risk in check.