When it comes to fully utilizing the potential of spend analysis nearly 60 percent of companies admit to falling short. The problem does not lie in the level of commitment or a lack of expertise; instead, in most cases, it is caused by erroneous data. Understandably, if a company wants an accurate picture of their procurement processes, it needs accurate data.
However, due to systematic pitfalls in in-house managing software, particularly in categorizing the data, managers are often left powerless or with inaccurate results. Data that is not valid also paints an erroneous picture of a company’s performance. This means that instead of pointing out actual opportunities for operational enhancement and improvements in supply chain management, spend data analysis could point to something different altogether. If these proposals go forward unnoticed, there can be disastrous results for the company.
Identifying Opportunities for Cost Saving
Another area where many managers and executives claim to fall short is initiating action based on spend analysis results. The logical step in the sequence after collecting and analyzing data is to interpret it and then implement the changes indicated. This can be done by implementing strategies such as:
1. Strategic Sourcing
Spend analysis can allow managers and executives to implement effective strategic sourcing strategies. The categorization of data, along with relevant information for each product can help in implementing effective cost saving practices. This includes supplier rationalization in order to cut down on freight charges and negotiate better terms based on a volume discount.
2. Easy Savings
Other areas for savings can be identified by starting with the simple categories. Take for example your office supplies provider: you could save a good deal by consolidating orders. Another method of pushing down costs is spreading word about looking for new suppliers – you may be surprised at the new discounts your existing supplier suddenly has for you.
3. Looking Beyond Procurement
Cost cutting measures and savings can only go so far before hitting a dead end. There is no way to perfectly tone down every cost, so in order to unlock more savings, it is crucial to look beyond the supply chain. Starting with a re-evaluation of existing services such as benefits, travel comp, and marketing may be of help. It may also help to switch to more energy efficient office equipment.
Identifying Opportunities for Cost Saving
Another area where many managers and executives claim to fall short is initiating action based on spend analysis results. The logical step in the sequence after collecting and analyzing data is to interpret it and then implement the changes indicated. This can be done by implementing strategies such as:
1. Strategic Sourcing
Spend analysis can allow managers and executives to implement effective strategic sourcing strategies. The categorization of data, along with relevant information for each product can help in implementing effective cost saving practices. This includes supplier rationalization in order to cut down on freight charges and negotiate better terms based on a volume discount.
2. Easy Savings
Other areas for savings can be identified by starting with the simple categories. Take for example your office supplies provider: you could save a good deal by consolidating orders. Another method of pushing down costs is spreading word about looking for new suppliers – you may be surprised at the new discounts your existing supplier suddenly has for you.
3. Looking Beyond Procurement
Cost cutting measures and savings can only go so far before hitting a dead end. There is no way to perfectly tone down every cost, so in order to unlock more savings, it is crucial to look beyond the supply chain. Starting with a re-evaluation of existing services such as benefits, travel comp, and marketing may be of help. It may also help to switch to more energy efficient office equipment.