Sharp Spend Analysis© – Discovering Cost Savings Opportunities in Sourcing
There have been numerous articles about smart spending analysis. I prefer the term Sharp Spend Analysis©. Clear is another term for sharp. Clear paints a vivid picture for me and today’s post is based on that approach. Procurement teams that are on top of their game clearly see the opportunities.
A straightforward goal of your spend analysis should be: help identify opportunities to make better buying decisions.
CFOs and CPOs who are able to reduce costs will stand out from their peers. Quality data and the time and tools to analyze it are major challenges for procurement teams charged with achieving consistent tangible cost savings.
In this post I will share an idea to help your organization identify more tangible procurement cost savings opportunities.
Companies frequently have vast amounts of data available. This data should help them make better decisions. Unfortunately, the data typically resides in different payment and procurement systems. It is often coded differently in each system and this can make aggregating it a time-consuming task.
To create a sharp spend analysis© you will need to combine data from all of your procurement and payment systems and organize it into one data set for analysis. You may have to fight through some internal barriers to get the data you need.
In many companies collaboration and sharing of data among profit centers or across divisions or product lines is an ideal and not a reality.
I would start with a small sample of common spend items. Use this sample to figure out the mechanics of aggregating the data. Look to identify key common data points about each commodity, SKU or item to support your analysis.
To get a clear picture of the cost savings opportunities you will need to accumulate by commodity, SKU or item the total spend:
- By commodity, SKU or item
- By each internal center (division, profit or product line)
- By supplier ranked for concentration
- By supplier on all related and unrelated items
In addition, you will need to know the range of spend by commodity, SKU or item.
Once you complete your analysis you should be in a good position to sell your CFO or CPO on the value of a complete sharp spend analysis©.
Without it your team will be left to wonder if you have identified all of the opportunities to reduce costs and make your superiors look good.
Action Step: What procurement items should you look at first?
I would start by asking these questions:
What sourcing data at the commodity, SKU or item level for common spend items do we have available throughout the company?
Can we obtain cooperation and collaboration within the organization to gather information on a handful of items to develop a spend analysis that provides a clear picture of our cost savings opportunities?
If you can obtain that information from your payment and procurement systems you will be in great position to perform the analysis.
Next week I will continue on this same theme so your organization can improve your bottom line.
If you would like to know more ways to reduce costs without changing the way you do business simply give me a call or send me an email with your contact information and the best time to reach you.
You Won’t Drift to Success©
Think about it.
Until Next Time, I Wish You Great Success in Your Business and in Your Life