Goods Spend Analysis
Prepared by: Anjela Li
Date: January 13, 2012
TABLE OF CONTENTS
Goods Spend Analysis: How is it conducted?
How spend analysis fits the procurement strategy
Spend analysis is the process of collecting, cleansing, classifying and analyzing expenditure data with the purpose of reducing procurement costs, improving efficiency and monitoring compliance. It can also be leveraged in other areas of business such as inventory management, budgeting and planning, and product development.
There are three core areas of spend analysis - visibility, analysis and process. By leveraging all three, companies can generate answers to the crucial questions affecting their spending, including:
▪ What am I really spending?
▪ With whom am I spending it?
▪ Am I getting what’s been promised for that spend?
Spend analysis is often viewed as part of a larger domain known as spend management which incorporates spend analysis, commodity management and strategic sourcing.
Companies perform spend analysis for several reasons. The core business driver for most organizations is profitability. In addition to improving compliance and reducing cycle times, performing detailed spend analysis helps companies find new areas of savings that previously went untapped, and hold onto past areas of savings that they have already negotiated.
Benefits of Spend Data Management:
2. Goods Spend Analysis: How is it conducted?
3 major components of a spend analysis:
|Component |Activity |Typical deliverable | |(a)Opportunity assessment |Collect and validate category spend data/diagnose |High level spend analysis | | |company spend |Savings opportunity ranges | | |Analyze industry/market trends |Sourcing project plan | | |Prioritize and sequence opportunities |Sourcing maturity assessment | |(b)Creation of category profile |Define category spend by supplier, spend, |Detailed baseline spend analysis | |(c)Marketplace assessment |region/customer |Preferred parts list | | |Determine category requirements, specifications, |Industry and supply market analyses | | |forecast |Total cost components | | |Determine total cost components |Potential switching/change out costs (ex: replacement cost| | |Conduct detailed supply market and value chain analysis |of propane tanks when switching suppliers should be | | |Determine supplier universe and identify potential |considered when creating a sourcing strategy and in the | | |suppliers |analysis for potential savings) | | |Collect feedback from stakeholders regarding supplier | | | |performance | |
3. Key Triggers
✓ Spend by type of goods: provides visibility...
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