Comments on: Why Spend Analysis Frustrates Those Who Need It Most http://www.esourcingforum.com/archives/2007/01/16/why-spend-analysis-frustrates-those-who-need-it-most/ The source of information and best practices in strategic sourcing. Fri, 09 Jan 2009 21:59:38 +0000 http://wordpress.org/?v=2.6.2 By: Eric Strovink http://www.esourcingforum.com/archives/2007/01/16/why-spend-analysis-frustrates-those-who-need-it-most/#comment-4313 Eric Strovink Thu, 18 Jan 2007 02:51:46 +0000 http://www.esourcingforum.com/?p=351#comment-4313 Actually, David, there are a lot of indirect power users among financial services sourcers. Indirect spend (all they have!) tends to be more difficult to manage than direct, requiring more sophisticated sourcing strategies. For example, indirect categories often considered "unsourceable" can be attacked successfully with disaggregating rate cards and similar complex techniques (commercial print is an example). A powerful analysis and visibility platform provides important leverage for those efforts. Actually, David, there are a lot of indirect power users among financial services sourcers. Indirect spend (all they have!) tends to be more difficult to manage than direct, requiring more sophisticated sourcing strategies. For example, indirect categories often considered “unsourceable” can be attacked successfully with disaggregating rate cards and similar complex techniques (commercial print is an example). A powerful analysis and visibility platform provides important leverage for those efforts.

]]> By: David Rotor http://www.esourcingforum.com/archives/2007/01/16/why-spend-analysis-frustrates-those-who-need-it-most/#comment-4312 David Rotor Thu, 18 Jan 2007 01:55:42 +0000 http://www.esourcingforum.com/?p=351#comment-4312 Eric, I like the way you've thought about expenditure analysis, it's a process near and dear to me. Last year I worked through an analysis with over $20 billion in transactions and over 50 organization data feeds. I think you could add a couple of dimensions to your construct. First, is the spend being analysed indirect or direct? I would suspect that you'll find very few indirect power users. On the other hand as the size of the spend and complexity of the spend rises you'll find more power users. What I observe is that companies, in a massive generalization, are comfortable employing one mid to senior procurement person for every $50-$100M in spend. The more categories that are in that spend the less likely they are to be able to be a "power user". What internal expenditure analysis can't do for you, even if you are a power user, is to provide market knowledge. Our ability to negotiate deals with suppliers depends on our "market power". Creating market power is a process of building credibility by understanding your own spend (through analysis), optimizing volume (aggregating or disaggegating, shameless pitch, I wrote a short post on the value of disaggregating if you're interested), shifting demand, and market knowledge. Thanks for your post, Cheers, David Rotor Eric,

I like the way you’ve thought about expenditure analysis, it’s a process near and dear to me. Last year I worked through an analysis with over $20 billion in transactions and over 50 organization data feeds. I think you could add a couple of dimensions to your construct. First, is the spend being analysed indirect or direct? I would suspect that you’ll find very few indirect power users. On the other hand as the size of the spend and complexity of the spend rises you’ll find more power users.

What I observe is that companies, in a massive generalization, are comfortable employing one mid to senior procurement person for every $50-$100M in spend. The more categories that are in that spend the less likely they are to be able to be a “power user”.

What internal expenditure analysis can’t do for you, even if you are a power user, is to provide market knowledge. Our ability to negotiate deals with suppliers depends on our “market power”. Creating market power is a process of building credibility by understanding your own spend (through analysis), optimizing volume (aggregating or disaggegating, shameless pitch, I wrote a short post on the value of disaggregating if you’re interested), shifting demand, and market knowledge.

Thanks for your post,

Cheers,

David Rotor

]]>