Spend Analysis Steps
Step One: Get support from stakeholders
Gathering complete and accurate data of total goods spending requires the access to spend data from all relevant sources both within and outside the company. Good data cannot be collected when spend analysis is not supported by stakeholders including customers, suppliers, and internal clients. Step Two: Form a spend analysis team
The company needs to realize that spend analysis is too critical to be assigned as an additional duty of purchasing department. A spend analysis team should be formed and dedicated to collect and analyze data and perform more strategic functions such as future spend forecast, budget review and adjustment, and program research. Step Three: Examine data quality and identify an effective data management process A considerable number of purchase orders or purchasing activities are not electronically transmitted in the company therefore the accuracy of purchasing records must be examined. In order to obtain complete, accurate, and consistent data, all stakeholders should identify an effective data/record management process to ensure accuracy. Step Four: Create a proper classification schema
It’s very unlikely that the company will adopt an automated spend data management system designed for spend data extraction, cleansing and classification process. The spend analysis team will have to determine how to group spend data around distinct commodities with the concept of strategic sourcing in mind. Spend data should be categorized at the item level, providing visibility and allowing comparisons of detailed attributes across suppliers and commodities. Step Five: Implement spend analysis reports on a monthly basis The monthly spend analysis reports should highlight the top suppliers, internal customers, commodities receiving spend. Other reports addressing accumulated savings and process improvement should also be implemented and shared with other stakeholders for the purpose...
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