Gather around E-Sourcing Forum readers, I have an offer for you! Iasta has sponsored the latest Aberdeen Benchmark study on Spend Analysis, titled Spend Analysis: Working Too Hard for the Money. Just follow the link and you will be given access to download the report directly from Aberdeen. As a teaser, here are the details from the Exec Summary.
While enterprises are clearly able to recognize and communicate the benefits of utilizing spend analysis technology, they have not yet bridged the gap to action. Sixty percent of organizations currently rely on manual tools to collect and analyze spend data, resulting in limited spend visibility and the inability to improve cost savings.
Aberdeen evaluated over 700 enterprises in July and August of 2007 and distinguished Best-in-Class enterprises by the percentage of enterprise spend under management. Best in Class enterprises in this study are notable for their superior performance and credit spend analysis solutions for delivering the following benefits:
- 12.7% savings due to sourcing efforts based on spend analysis data
- 9.1% reduction in manual correction of spend cleansed and classified
- 73% rate of compliance to contractual agreements
Competitive Maturity Assessment
Best-in-Class performers shared many common characteristics with respect to their spend analysis strategies. Best-in-Class companies are:
- 40% – 94% more likely to establish executive support for spend analysis initiatives
- 40% more likely to utilize spend analysis reports that provide details at the transaction level
- 30% more likely to have enterprise-level visibility into spend
- Establish executive support by demonstrating the ROI of a spend analysis investment
- Know what you can and can’t do – establish a baseline for spend analysis capability
- Move beyond sourcing cost savings – contract compliance will also positively effect the bottom line
Spend Under Management
The classic measure of procurement’s impact upon an enterprise is the percentage of non-payroll-related spend that falls under management of this group, what is commonly
referred to as spend under management. Aberdeen research has shown that enterprises have been able to achieve a 5% to 20% cost savings for each new dollar of spend brought under management.
“If you take away spend analysis capability from a company, you might as well turn the lights out on the procurement department. Then all they’ve become is a transactional processing group that doesn’t add much value to the organization.”
– Vice President, Large Property and Casualty Insurance Enterprise