The Spend Analysis mechanism
works through data mining algorithms and allows the improvement of many aspects
i.e. better understanding of spend patterns, identification of key suppliers
spend visibility until the point of order, accurate categorization which
outcomes are important savings for the company. Understanding the components of
spend analysis mechanism is very important before the implementation of
different other solutions. Jason Busch, Widely recognized as the leading expert
on spend management wrote in a recent article about the roots of spend
management technology at spendmatters.com. He noted that the initial goals of
spend analysis software were to build a tool set that would include the
following capabilities.
- The ability to collect and analyze data across multiple operating units, systems, instance, and versions.
- Advance data cleansing and analysis.
- Common commodity classification and structure.
- Item level visibility.
- The need to build repeatability and sustainability into a process versus taking on spend analysis as a onetime effort.
Many companies still do not
apply strategic sourcing techniques to indirect spend categories. Instead
indirect spend is treated as a series of one-off purchases, or is sourced with
a simple three bid strategy with no efforts beyond reviewing the supplier price
responses. Typically, with indirect spend per item prices are relatively low,
the product or service is not crucial to the entailed in gathering meaningful
spend and market data. Strategic sourcing allows companies to shift away from
thinking about indirect spend and provides spend visibility, objective decision
making and a project management tool to ensure efficient use of the sourcing
team’s time and efforts.
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