In the age of Do More with Less the focus on Procurement has changed. It’s not just about finding the best price anymore — it’s about adding value across the entire enterprise. And the basis of this transformation is strategic spend Analysis & spend management.
There is so much more potential resting in this underleveraged asset – spend data. When captured, it unlocks knowledge that can power more informed decision-making, stronger supplier relationships, reduced exposure to risk, and eventually, business growth. This is where spend analytics tools and spend management services come into play.
What Is Spend Analysis?
Spend analysis is the process of aggregating, classifying, cleansing, and analyzing spend data to reduce procurement costs, improve efficiency and monitor controls. The goal is to understand how money is being spent, with whom, and if the spending is supporting [corporate] goals.
Strategic spend analysis is unlike basic cost tracking. It offers visibility into trends, wastages, procurement vulnerabilities and areas of savings and value unlocking.
A few of the main objectives are:
- Pooling of supplier spend to get discounts by aggregation
- Discovering off-contract or maverick expenditure
- Pinpointing compliance gaps
- Improving budgeting precision and prediction
- Spending aligned with ESG or DEI aims
With a 360-degree perspective on spend behavior, companies can make more effective decisions by focusing on long-term value, beyond simply savings for the quarter.
How Spend Analytics Tools Drive Procurement Success
No longer are the days when procurement just managed with a spreadsheet or a siloed ERP report. The best of today’s spend analytics tools are full-featured, AI-capable platforms that deliver far more than raw data crunching.
This is what you would expect from a contemporary spend analytics platform:
- Combining and cleaning the data
Most companies have fragmented data on spend from disparate systems (ERP, invoicing, P2P tools, etc.) Advanced solutions aggregate and cleanse this data; cleaning it up and making it more accurate and complete.
- Automated Classification
Powered by AI and machine learning, spend is classified into standardized taxonomies for accurate spend mapping across categories and suppliers.
- Real-Time Dashboards and Insights
Visual dashboards intuitively illustrate spend by business unit, region, supplier or category. Custom filters enable the procurement professionals to dig deeper and look for patterns or abnormalities.
- Predictive and Prescriptive Analytics
Best-in-class spend analytics tools provide forecasting functions that predict future events that will influence the company based on historic trends, market factors and supplier performance.
What Are Spend Management Services?
Even with the best tools, it takes experienced people to make sense of the spend data and turn it into smart procurement strategies. This is where spend management services can help.
Generally offered by procurement consulting firms, or MSPS, optimizing enterprise spend is their sole purpose. These firms have evolved into strategic partners that control the lifecycle of spend, from substance to tender.
Key Offerings of Spend Management Solutions:
- Spend diagnostics and opportunity identification. Spend diagnostics help an organization to assess the complementary relationship of sourcing actors.
- Tail spend and indirect category management
- Supplier performance evaluation
- Development and execution of sourcing strategies
- Savings & value realization tracking and governance
- Policy and regulation framework developments
These offerings are particularly useful for large corporations with intricate procurement ecosystems or mid-sized businesses that aren’t yet operating with a high-functioning in-house team.
Real-World Business Benefits
If your organization is using spend analytics solutions and spend management providers, you’ll generate significant value beyond procurement.
- Cost Savings and Efficiency
With centralized visibility, supplier negotiations, contract compliance, and strategic sourcing results in direct savings.
- Risk Reduction
Monitoring Single-Sourced Dependencies, contract expirations, and supplier risk factors for supply disruption and compliance issues.
- Enhanced Decision-Making
Leaders have visibility into precise spend that impacts budgeting, supplier strategy and M&A.
- ESG Alignment
Spend analysis can monitor diversity, sustainability, and ethical sourcing KPIs, and connect procurement to environmental and social objectives.
- Greater Agility
When spend is classified and insights are delivered in near-real time, procurement can quickly react to market changes and supply chain instability.
Conclusion
Never before has there been a greater need for agility and intelligence in a business world marked by disruption. Strategic spend analysis and management enables organizations to not only survive, but thrive – making smarter, quicker and more effective decisions with data.
