- 08
- JUL
- 2010
How can organisations optimise spend analysis processes?
Author: Ben Ngobi - Categories: Spend Analytics
Spend analytics can be a major source of competitive advantage for those organisations that are able to identify existing gaps within the process and implement an effective analysis process. An optimised spend analysis process allows organisations to gain greater visibility over their spend levels, as well as provide insight into trends, data inter-relationships on supplier performance and other key performance indicators.
However, operational and managerial obstacles in organisations do not allow access to critical data, or when data is readily available, it is difficult to extract and convert into meaningful management information. Some organisations with fairly effective spend analysis processes take overly long periods to arrive at spend analytics - the graphical or tabular representation of an organisation's spend. A month taken carrying out spend analytics is a month of opportunity to extract value lost.
I am kicking-off an in-depth research project investigating the merits of spend analysis, as well as how spend analytics can offer real practical solutions to maximise value both in the short and long term. I am particularly interested in the human aspect of spend analysis, the desire to engage with data within procurement organisations.
The presumption is that people generally do not appreciate the effects of their activities on other parts of the procurement organisation or those whose need of data accuracy might be greater. Additionally, there is a level of education required to enhance and engage with IT systems in order to appreciate management information.
These human factors are partly responsible for data integration problems, which cost both money and time. Why do organisations allow this failed state to persist knowing that without clear understanding of spend under management, you are potentially wasting money?
The full results of this project will be available at the beginning of Q4. In the meantime, I am interested to engage with procurement or IT professionals who have direct experience of using spend analysis or have implemented spend analysis systems.
Comments
Jonathan Webb
Mon 12 Jul 2010 12:29
Why are there so many suppliers in the market? There are already about 30-40 providers of spend analytics solutions, and this is still growing. Is this because the existing providers don't know what they are doing? Or is the market really big enough to cater for so many?
Does this mean that the market is prime for consolidation soon?
Wed 14 Jul 2010 14:58
There are a lot of spend analysis providers and they seem to be continuing to crop up! The market looks crowded and appears to be in a check-list battle stage' where functionality is a key differentiator. I think the industry has mushroomed because of Business Intelligences increasing importance as well as the increasing corporate thirst for spend visibility (and subsequent cost saving).
I think it is also partly due to the fact that there are software companies that have software capable of performing spend analysis (or similar technologies than can be modified). They see the opportunity to enter an emerging market so they develop existing products & services to suit requirements.
An example may be Needlebase by ITA software (recently acquired by Google).
I'm not sure if the current market formation is sustainable but I think that the demand for spend analysis capabilities will continue to increase; as the potential advantages of merging the spend information with other ERP systems, to achieve enhanced business intelligence, are properly realised.
I think a current barrier to spend analytic's being widely perceived as a highly valuable tool may be due to the complexity of it all. As well as the time and cost required to achieve spend visibility efficiently across the whole organisation.
Rajat via LinkedIn
Thu 5 Aug 2010 16:33
In Procurement "Leverage" is the key & one will be unable to do so efficiently in the absence of effective analytics. First things first, there is always a need to effectively bucket your spend in appropriate groups & ensure that these groups do not overlap. Constant Price Benchmarking could additionally help in improving the overall analysis process. **Disclaimer - The above statements are solely my individual opinion & do not represent any associated or otherwise organization/institution.
Efam via LinkedIn
Thu 5 Aug 2010 16:34
It's also important to keep spend data (cost associated with procurement) properly and in an organised manner on a daily bases as only records that are kept within the system can be colated for further analysis