Spend analysis in procurement is a longstanding concept, however, implementation can be difficult without the proper tools. Spreadsheets are tedious to manage and make it extremely difficult to reap the benefits. Over the years, implementing this kind of analysis has become more accessible than ever with the advent of robust procurement tools and software. The benefits of spend analysis are many, and regular analysis is imperative to managing maverick spend and figuring out where your money is going.
Read on to learn more about the advantages of spend analysis, why you must implement it within your procurement processes, and the top five benefits you’ll gain from it.
1. Managing Maverick Spend
Tightening the belt on maverick spend (a.k.a. tail spend) is one of the top benefits of spend analysis software. You need to know exactly where money is being funneled while minimizing maverick purchasing. This software ensures you maintain focus on what happens after signing the contract with a vendor and that you are receiving the best post-possible value for your dollar. When you have the correct software, you can gain insights such as:
- Spend in relation to budgets
- Spend per category
- Spend per supplier
- Purchase frequency
It’s estimated that maverick spend can be up to 20 percent of your total spend, so analyzing and controlling it is one of the most important benefits of spend analysis.
2. Discover Opportunities for Savings with Spend Analysis
The decisions your procurement team make have a significant impact on your bottom line. Another important benefit of the spend analysis process is discovering hidden savings opportunities.
With the proper spend analytics software, you can compile and organize data—identifying, quantifying, and prioritizing your spend while putting it into action to help you save. This is closely related to controlling maverick spending, as both are top benefits of spend analysis related to discovering new savings opportunities
3. Performance Against Market Development
Imagine a spend analytics use case where the price for materials or services has increased by 30 percent during the last calendar year, while your logistics costs have decreased by 15 percent. Benchmarking performance against market development is another benefit of spend analysis. Obviously, comparing performance against market development is imperative—but the right software allows you to evaluate your past performance with the opportunity of “beating” the market in the future.
4. Supplier Base Rationalization
The benefits of spend analysis include compiling your data to make more informed decisions about which suppliers to partner with. Proper spend analytics aid in:
- Your total spend with suppliers
- Costs per transaction
- A more comprehensive look at your suppliers— including strategic suppliers
The proper spend analytics tools allow you to review price comparisons, identify vetting and onboarding issues, and streamline supplier consolidation, leading to lower prices and higher quality materials and services.
5. Improving Delivery Performance
The benefits of spend analysis also affect delivery performance. Once your data is structured and compiled, you will see a noticeable improvement in supplier performance, which is tied in with the transparency of your process and what you share with your suppliers. For instance, the ability to share transaction data can help reduce delivery delays. Transparency benefits both buyers and suppliers, and is a boon to the overall relationship between the two.
These five benefits, and more are easily achieved by having the correct tools. To learn more about how Simfoni’s powerful and intuitive procurement platform can help you build and optimize supply chain resilience, schedule a demo today!