Category Archives: Spend Analysis
One day last week, I was driving to work and listening to a story on NPR about a coffee farmer from a remote region in Guatemala. The story continued as they discussed a hip coffee shop in Portland, Oregon that is using spend visibility to sell cups of coffee. Okay, they didn’t say, “spend visibility,” but the coffee shop is certainly following spend analysis logic. The story by Allison Aubrey was about how a struggling coffee farmer managed to cut … More
For many Sourcing organizations, especially those at mid-market companies, being involved in Strategic Sourcing of Indirect Spend categories is still a relatively new opportunity… and a challenge! Many manufacturing companies, which have historically had sourcing organizations focused on Direct Material and Capital Equipment purchases, may not have the internal staff or correct Subject Matter Experts (SMEs) to get involved in negotiating and managing indirect expense categories. In fact, sourcing organizations may not even exist at some companies, namely those in … More
In a previous blog, we discussed the use of spend analysis technology as a compliance tool. Today, I want to introduce an additional value that spend analysis can greatly improve—sourcing cycle time performance. In today’s world, spend visibility has become vitally important for procurement organizations to make the right sourcing decisions, especially when there is an increased focus and visibility on driving bottom-line results. With added pressures on procurement teams, often the primary way to improve the bottom-line is to … More
Until recently, governments at all levels have found the market for budgeting tools to be woefully inadequate. Accordingly, most governmental organizations continue to use cobbled-together, Frankenstein-like budgeting tools that, more often than not, rely on users to extract or re-enter data in offline spreadsheets to analyze budgetary policy proposals. Such tools are labor-intensive, inflexible, error prone, limited by the data collected and fail to provide timely, sufficient budgetary insight to optimize resource allocation. In this time of greater public budget … More
When examining spend, the most effective way to start is at the top. This method will expose categories with the most savings opportunity because more savings are reaped from higher spend. A lot of corporate spend falls into only a select few categories. For example, a company may have 80% of its spend going to Financial Services, IT, and Published Products. A good spend analysis product should display a Pareto Analysis within each category in its reporting suite. From there, … More
When procurement professionals are speaking with me about spend visibility, one of the first questions I ask them is: “What do you want to accomplish with improved spend visibility and data?” I lead with this question because there are many ways to define spend analysis as part of the strategic sourcing process and countless ways to empower sourcing professionals with actionable information. I encourage my clients to start with spend velocity reporting as a traditional starting point, which helps access … More
If all companies knew how to get spend analysis right, then there would be many more happy shareholders in the market, looking forward to their monthly holdings statements showing rising stock prices as a result of improved company earnings. But few companies that start a spend analysis journey get off on the right foot. All too often, procurement teams are misled by an incorrect map, showing a false path to what they believe should be their ultimate destination. At its … More
It never ceases to amaze me that during harsher economic times, organizations choose to reduce/cancel budgets for procurement projects. It is understandable for those functions that are more client-facing, where revenues are challenged, but why the procurement budget? A $/€/£ saved is a $/€/£ more profit – there are no cost of goods/services to be charged. Organizations need all the help they can get at the moment and where better to turn to than procurement? It would be understandable if … More
David Bush previously wrote a post for eSourcing Forum called ‘Spend Analysis – To UNSPSC or Not UNSPSC.’ In which he made the following statement, “Visibility into your spend is only as good as a desired taxonomy’s ability to accurately reflect the nature of your data.” UNSPSC (the United Nations Standard Products and Services Code) is commonly used as a standard taxonomy in spend analysis implementations because most companies do not have a custom taxonomy for categorizing spend. UNSPSC is … More
The quest for greater visibility drives procurement teams to implement new technologies and revamp existing processes. We look for spend visibility, supply base visibility, and visibility into the inventory planning process. Beyond visibility for its own sake, there are a number of initiatives procurement can’t start without having more information. We can’t plan the waves of a sourcing opportunity assessment or define governance guidelines for setting spend authorization limits. Even once we have gotten visibility into a company’s spend activity, … More
At month end, many families struggle with too many bills and not enough cash. What to do? Financial planners suggest that families start a log of all expenses so that at the end of the month they can see where the cash went. Families that do that find opportunities to cut back. “I didn’t realize I spent that much at Starbucks” is a typical revelation. Businesses face the same situation; cash seems to disappear: Financial statements show expense categories, but … More
Today, many children will roam the streets trick-or-treating, and people of all ages will attend costume parties and decorate their homes with all things “scary.” This spooky holiday got us thinking about what fears keep procurement professionals restless and awake all night. Below are three of the scary situations we came up with for procurement: 1. Supplier risk – Risk should always be taken into account as part of good supply chain governance. Without having a process in place to track and … More
During the first half of 2011, more than 4,100 merger and acquisition (M&A) transactions took place, according to a recent article on Open Forum. These transactions were valued at more than $620 billion. In the second quarter of the year alone, more than 2,000 M&As were successfully completed, with a transaction value exceeding $260 billion. You don’t see only big companies participating in M&As, either. According to the article, “People are attracted to larger numbers and that’s why those deals … More
Did you know post M&A spend analysis efforts typically yield a savings of 7-10 times the project investment? Spend visibility is critical in helping your organization consolidate its purchasing power. Without spend visibility, you could be missing out on significant cost-savings opportunities. You never know where your organization’s true and best opportunities are until the majority of spend data has been analyzed. Join Iasta, Ciena and Andrew Bartels from Forrester Research for a free Webcast titled Using Spend Analysis to … More
