Spend Analysis Archives : Planergy Software

Tail Spend Analysis: What Is It, How To Perform It, and the Benefits

Lyle Del Vecchio — Thu, 02 Mar 2023 10:43:29 +0000

Download a free copy of "Indirect Spend Guide", to learn:

Where the best opportunities for savings are in indirect spend.
How to gain visibility and control of your indirect spend.
How to report and analyze indirect spend to identify savings opportunities.
How strategic sourcing, cost management, and cost avoidance strategies can be applied to indirect spend.

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Tail Spend Analysis: What Is It, How To Perform It, and the Benefits

Category

Spend Management

Written by Lyle Del Vecchio
17 min read

Tags

Last edited

July 2, 2024

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Introduction To Tail Spend Analysis
Defining Tail Spend
Benefits of Tail Spend Analysis
Tail Spend Analysis Best Practices
Establishing Tail Spend Analysis Metrics
Developing a Tail Spend Analysis Plan
Analyzing Data and Identifying Trends
Leveraging Tail Spend Analysis To Improve Efficiency
How To Automate Tail Spend Analysis

Tail spend analysis is an important tool for businesses looking to optimize spending and ensure their supply chain runs efficiently.

Tail spend analysis helps companies identify areas of spend that are falling through the cracks, allowing them to make more informed decisions and achieve greater savings.

In this blog post, we’ll cover what tail spend analysis is, its benefits, how to develop a plan for it, how to analyze data and trends, and how to best leverage tail spend analysis to improve efficiency.

Introduction To Tail Spend Analysis

Tail spend analysis examines a company’s spending patterns and identifies opportunities to reduce costs and improve efficiency.

It’s an important part of any organization’s financial management, as it helps identify wasteful spending and uncover potential savings.

Tail spend analysis helps companies identify areas of spend that are falling through the cracks and gain visibility into their overall spending.

By understanding where their money is going, companies can make more informed decisions, reduce waste, and save money.

The process of tail spend analysis involves analyzing data from various sources, including supplier invoices, purchase orders, contracts, and other financial documents.

Having the right information and insights is important to make the most of tail spend analysis.

Defining Tail Spend

Tail spend is a term used to describe the small, often overlooked purchases made by an organization. It’s typically low-value, high-volume purchases made in areas such as office supplies, shipping, and travel.

While these purchases may seem insignificant when taken individually, they can make up a sizable portion of a company’s total spend.

Tail spend follows the Pareto principle – the idea that 80% of a company’s spending can be connected to 20% of the supplier base.

The long-tail is where the majority of purchases occur.

Tail spend should not be confused with maverick spending, which is non-strategic spending that occurs outside of an established internal process.

It’s also not the same as spot buying, which is the unplanned, one-time emergency purchase of a small, inexpensive, infrequently used item.

Tail spend is often unmanaged spend because it’s spread out across multiple departments and suppliers. This can make it difficult to track and manage.

However, this doesn’t mean it needs to be ignored. Tail spend can be an important source of savings and efficiency gains.

Benefits of Tail Spend Analysis

Tail spend analysis offers several benefits for businesses.

By understanding their spending patterns, companies can gain visibility into their overall spending and ensure they get the best value for their money.

Tail spend analysis also helps procurement professionals identify areas of wasteful spending and uncover potential savings.

This can lead to cost reductions and increased efficiency, helping businesses reduce their operational costs and increase their profits, which is good for the bottom line.

Tail spend analysis can also help companies identify opportunities for consolidation and standardization. This can lead to improved relationships with suppliers and greater savings.

Finally, tail spend analysis can help companies better understand their purchasing patterns and identify areas where they can make more informed decisions, leading to better supplier relationships and more efficient purchasing processes.

Tail Spend Analysis Best Practices

There are several best practices to keep in mind when conducting tail spend analysis. Companies should:

Set clear goals and objectives for the initiative
Define the scope of the analysis
Analyze data from multiple sources
Identify trends and opportunities for savings
Establish metrics to track progress
Leverage insights to improve efficiency in the procurement process.

By following these best practices, companies can ensure they get the most out of their tail spend analysis.

When left unmanaged, tail spend can cost an organization millions of dollars. Managing tail spend is a worthy investment of time and resources.

Establishing Tail Spend Analysis Metrics

Companies should establish metrics to measure their progress to ensure they get the most out of their tail spend analysis.

This will help them track their efficiency and identify areas of improvement.

Common metrics for tail spend management include:

Cost savings
Number of suppliers used
Number of contracts renegotiated (contract management)
Number of items consolidated
Number of items standardized

By tracking these metrics, procurement functions can get a clear picture of their progress and identify areas for improvement.

Developing a Tail Spend Analysis Plan

To make the most of tail spend analysis, it’s important to develop a plan.

Companies should identify the goals and objectives of their analysis, the data sources they will use, and the metrics they will measure.

It’s also important to define the scope of the analysis. Companies should decide which categories of spend they want to focus on, such as office supplies, travel, or shipping.

This will help them narrow down the data and focus their efforts.

Once a plan is in place, companies should develop a timeline to ensure they stay on track and meet their goals, to help them stay organized and continue making progress.

Analyzing Data and Identifying Trends

Spend analysis is the art of extracting useful information from your spending data. It can help your company make better business decisions and avoid unnecessary waste.

However, it is also very time-consuming. A proper plan should be implemented to make the process as efficient as possible.

Spend analytics involves classifying your spending data, identifying relevant trends, and implementing solutions that improve your purchasing power.

This can help you to understand your expenditures and budgets and identify cost reduction opportunities.

Spend analytics can be performed by hand or with the help of software. Using data visualization tools, you can explore spend data and discover hidden insights.

Tools often have an intuitive interface that allows non-technical users to build customized dashboards and explore data in real time.

Getting your spend data in order is a key first step in any spend analysis project. Clean spend data will enable you to analyze and improve your spending quickly.

Once a plan is in place, companies should begin analyzing their data. This involves looking at spending patterns and identifying areas of potential savings.

Companies should look for trends in spending, such as overspending on certain items or underutilizing certain suppliers.

Companies should also look for opportunities for consolidation and standardization. This can help them streamline their processes and reduce costs.

It’s important to remember that tail spend analysis is an ongoing process. Companies should regularly review their data and update their plan as needed.

Identify Your Supplier Base
When conducting a tail spend analysis, it’s important to understand your supplier base. Tail spend is often overlooked as a source of significant savings.
But when properly managed, it can save an organization up to 15 percent of its total procurement spending.
It can also help improve the employee experience. If your employees aren’t happy with the quality of products they receive from your suppliers, they’re likely to be less productive.
You’ll also be able to eliminate obstacles like delivery delays.
As many B2B businesses have learned, it pays to consolidate your supply base. Many suppliers are now working as aggregators. This means they’re expanding their business offerings to fulfill customer demands.
The best way to identify your supplier base is to conduct a comprehensive spending analysis. To do this, you’ll need to gather information on all spend data sources. Spend analysis includes grouping spending into standardized categories and cleaning data for errors.
After gathering all your data, you can categorize your expenditures and identify specific small purchases.
Categorizing your spending data by department or type of spend (direct vs. indirect spend) will help you achieve sustainable cost reduction with more strategic purchasing.
Segmenting “Major” Spend from “Tail Spend”
For most procurement teams, this can be a daunting task. However, it’s also an opportunity to create a competitive advantage. Companies often make a multitude of purchases, some of which may not be worth the time or cost.
While not a magic pill, many steps can be taken to improve the process and reduce costs.
Some key points to remember include the importance of data collection and establishing a process to follow. This can include a combination of technology and training.
A good way to start is by examining the various spend categories within your organization. This will give you an idea of where to focus your efforts.
Spend in areas such as direct purchasing and indirect purchasing can be especially beneficial.
Reducing the Number of Suppliers in the Tail-End
Companies can reduce the number of suppliers in the tail-end of their supply chain through digital tools and a well-established procurement framework.
This can help them save time and money while maintaining quality and compliance with business policies.
For instance, one manufacturing company found hundreds of duplicates in its supplier list. The team used an algorithm to identify these duplicates and eliminated them from their RFQ.
They found that their costs could be reduced by about 30%. Another example involves a global chemicals company. By bundling materials with strategic suppliers, they can get better prices, less lead times, and reduced quality issues, making stakeholders happy.
However, switching suppliers can be difficult. Suppliers often need approval from production, R&D, or quality control. When a new supplier is brought in, they must understand the product or service’s value to the company.

Leveraging Tail Spend Analysis To Improve Efficiency

Once companies have identified areas of potential savings through tail spend analysis, they can leverage these insights to improve their efficiency.

This can involve renegotiating contracts with suppliers, consolidating suppliers, standardizing processes, and streamlining operations.

For example, a company may renegotiate contracts with suppliers to get better pricing. Or, they may consolidate suppliers to reduce the number of vendors they manage.

By taking these steps, companies can reduce their costs and improve their efficiency. This can lead to increased profits and a more streamlined supply chain.

How To Automate Tail Spend Analysis

Tail spend analysis can be a time-consuming and labor-intensive process. To make it easier, companies can leverage technology to automate the process of spend analysis.

Automation tools can help companies quickly and easily analyze their data and identify areas of potential savings. They can also help automate supplier contract negotiation and data analysis processes.

Planergy’s procurement system helps you with tail spend analysis with our comprehensive spend management tools and spend analysis software. Our tools make it easy to track spending, analyze data, and identify opportunities for savings.

Our tool can be used to support strategic sourcing efforts and help the procurement department maximize budgets while reducing low-value transactions and one-off purchases.

Tail spend analysis is an important tool for businesses looking to optimize their spending and ensure their supply chain is running efficiently.

It can help companies identify areas of wasteful spending and uncover potential cost savings.

By developing a plan for tail spend analysis, analyzing data, and leveraging insights to improve efficiency, companies can reduce their costs and increase their profits.

Automation tools can also make the process easier and more efficient.

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What’s your goal today?

1. Use Planergy to manage purchasing and accounts payable

We’ve helped save billions of dollars for our clients through better spend management, process automation in purchasing and finance, and reducing financial risks. To discover how we can help grow your business:

Read our case studies, client success stories, and testimonials.
Visit our Spend Analysis Software page to see how Planergy can empower you to get more value from your spend.
Learn about us, and our long history of helping companies just like yours.

2. Download our “Indirect Spend Guide”

Download a free copy of our guide to better manage and make savings on your indirect spend. You’ll also be subscribed to our and notified about new articles or if have something interesting to share.

3. Learn best practices for purchasing, finance, and more

Browse hundreds of articles, containing an amazing number of useful tools, techniques, and best practices. Many readers tell us they would have paid consultants for the advice in these articles.

The post Tail Spend Analysis: What Is It, How To Perform It, and the Benefits appeared first on Planergy Software.

Pareto Analysis in Procurement: How To Use Spend Analysis To Cut Costs

Keith Murphy — Thu, 19 Jan 2023 10:06:50 +0000

Download a free copy of "Indirect Spend Guide", to learn:

Where the best opportunities for savings are in indirect spend.
How to gain visibility and control of your indirect spend.
How to report and analyze indirect spend to identify savings opportunities.
How strategic sourcing, cost management, and cost avoidance strategies can be applied to indirect spend.

Download Free Copy

Pareto Analysis in Procurement: How To Use Spend Analysis To Cut Costs

Category

Spend Management

Written by Keith Murphy
16 min read

Tags

Big Data Business Intelligence (BI)Spend Analysis

Last edited

July 2, 2024

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Pareto Principle vs. Pareto Analysis

The Pareto analysis and Pareto principle are often confused and even used interchangeably, but they are two distinct concepts.

The Pareto principle, also known as the 80/20 Rule, is a heuristic that suggests that 80% of results can be attributed to 20% of causes.

Pareto analysis is a form of data evaluation that looks at how much of an effect individual factors have on a larger system.

This technique prioritizes which factors to address based on how much they affect the entire output or goal, making it easier to target the highest impact areas for improvement.

In short, the Pareto principle expresses the importance of prioritization when making improvements, while Pareto analysis exemplifies this approach through structured evaluation.

Procurement professionals can use pareto analysis to examine various aspects of business and adjust strategy.

What is Pareto Analysis?

Pareto Analysis, also known as ABC analysis, is a data-driven approach for determining which factors are having the greatest impact on a particular outcome.

This concept can be used to identify which products or services are driving the highest costs within an organization’s procurement process.

By analyzing spend data, companies can identify the specific items where it makes sense to focus their efforts for cost savings.

For example, let’s say your company spends $100,000 a year on office supplies like paper and pens.

Upon further analysis, you might find that $70,000 is spent on high-end stationery while only $30,000 is spent on pens and other low-cost items.

This would mean that 70% of your spending is going toward one type of product—in this case, stationery—and 30% is being spent on other types of office supplies.

This is an example of how the Pareto Principle can be applied to spend analysis; by focusing your efforts on reducing costs associated with stationery purchases, you could potentially save more money than if you were trying to reduce all office supply costs equally.

How Pareto Analysis Works?

In a nutshell, Pareto analysis works by sorting data into two categories: “vital few” (which refers to those items or services that produce most of the value) and “useful many” (which refers to those items or services that produce little value).

Using ABC Analysis:

Class A: These purchases account for 80% of your total cost of purchases for 20% of suppliers.
Class B: These purchases account for 15% of the total cost of purchases for 30% of suppliers.
Class C: Tail Spend: These purchases account for 5% of your total cost of the purchases for 50% of your suppliers.

For example, if an organization spends $1 million on supplies each year and finds through Pareto analysis that $800,000 of that amount is being spent on just 20% of suppliers, that 20% of suppliers should get special attention because they are producing the greatest value for money.

Similarly, if an organization finds through its spend analysis that only 10% of its products are generating 90% of its profits, it may make sense to invest more resources into marketing or researching those products while cutting back on other products with lower returns.

The Benefits of Conducting a Pareto Analysis

Conducting a Pareto Analysis in procurement provides numerous benefits for organizations.

Not only does it allow companies to quickly pinpoint areas where they could save money without sacrificing quality or value, it also gives them insights into their customer’s needs and preferences, so they can better tailor their offering accordingly.

Additionally, since it requires minimal effort and resources compared to other cost analysis methods, it has become a popular choice among many businesses looking for ways to optimize their budgeting process.

Pareto Spend Analysis is an incredibly useful tool for optimizing supply chain management processes, reducing costs, and improving overall efficiency.

By leveraging this approach to analyze spending data across various categories, such as supplier type or product category, businesses can quickly identify their highest value suppliers while also uncovering potential cost savings opportunities.

Ultimately this leads to smarter decision making when it comes time to purchase goods or services from vendors – resulting in improved ROI while still maintaining high-quality standards throughout the process.

Procurement professionals should take advantage of Pareto Spend Analysis whenever possible to maximize savings and improve performance in their supply chain management initiatives.

While the main goal is to reduce costs and improve sourcing, it can also help improve supplier relationships, giving your organization a competitive advantage.

How to Conduct Your Own Analysis?

To start your own analysis, choose what you’re going to look at, then collect your data.

For instance, let’s say you want to look at suppliers’ late deliveries. In this case, you’ll want to collect:

All suppliers
All the suppliers’ deliveries over the last year.

Use an Excel spreadsheet to create a chart and help you with the math.

Create a table with:

Supplier Name
Total Deliveries
Late Deliveries
Percent Late
Cumulative Percent Late

Once you’ve collected your data in the chart, sort the table in descending order.

You’ll want to look at the Cumulative percent late column in this case, drawing a line at 80%.

From here, you’ll see the items that add up to 80% are the primary cause of your issues, while those that fall between 80 and 100% are not as important.

Practical Applications of Pareto Analysis

Once you’ve identified which products are driving the highest costs in your supply chain, it’s time to start looking for ways to reduce those costs without sacrificing quality.

Here are some practical applications of pareto analysis in procurement:

Negotiate Prices with Suppliers

Companies can significantly reduce their purchasing costs over time by working directly with suppliers to negotiate lower prices for high-cost items to improve your bottom line.

It’s important to remember that price negotiation isn’t always about getting a lower price; often, suppliers may be willing to offer discounts or free shipping as part of a deal, which can also help reduce expenses in other areas.
Consolidate Suppliers

Supplier consolidation and consolidating orders helps streamline delivery processes and eliminates time wasted coordinating multiple shipments for various items from different suppliers.

A balance needs to be struck between supplier rationalization and ensuring you have flexibility and backup in place for key supplies.

Consolidating orders allows companies to save money by cutting out excess labor costs associated with managing multiple orders at once and reducing inventory overhead expenses since fewer items will be needed in stock at any given time due to fewer orders being placed frequently throughout the year.
Utilize Automation

Automation technologies like robotic process automation (RPA) help streamline cumbersome manual processes related to ordering and invoicing so companies can save time and money while maintaining accuracy in their transactions.

RPA also helps ensure compliance with contractual agreements since it reduces human error and improves accuracy when tracking orders against agreed-upon terms between buyers and sellers.
Leverage Data Analytics

Data analytics tools provide insights into purchasing patterns that allow companies to monitor supply chain performance more closely so they can make informed decisions around pricing strategies or supplier partnerships based on real-time information about what customers are buying when they are buying it, and how much they are paying for it.

Leveraging data analytics tools also help companies identify potential cost-saving opportunities, such as consolidating orders across different departments or negotiating better deals with certain vendors who may have better prices than others for certain goods or services.

Tips for Conducting a Successful Analysis

When conducting a successful Pareto Analysis there are several key tips to keep in mind:

Set Clear Objectives

Before starting your analysis, make sure that you have clearly identified your objectives, including the metrics you’ll use to measure success.

This will help ensure that you stay focused on these objectives throughout the process and don’t get sidetracked by other data points.
Make Use of Data Visualization Tools

Visual aids such as graphs and charts can be extremely helpful when conducting a Pareto Analysis as they make it easier to identify patterns and trends in the data.

Additionally, these visual tools can be helpful when presenting your findings to stakeholders who may not be familiar with complex data sets. And that’s where the Pareto chart comes into play.

A Pareto Chart is a visualization tool professionals employ to assess how much a result or effect comes from a particular cause.

This powerful chart uses relative frequencies on its vertical axis, allowing metrics experts to analyze certain causes more deeply than an ordinary bar chart could.

The horizontal axis underlying the chart ranks data from largest to smallest values in order of importance, providing you with essential information about how particular causes shape an outcome.

When used correctly, this valuable tool can help metrics experts discover deeper trends in data sets and unlock hidden solutions for complex problems.
Test Your Results

Once you have identified potential solutions based on your analysis, it’s important to test them before implementing any changes so that you don’t introduce any unintended consequences into the system.

Testing allows you to validate your assumptions and ensure that any proposed solutions will result in positive outcomes before putting them into practice.

How Pareto Analysis Helps Your Procurement Strategy?

By leveraging Pareto analysis with data analytics tools and automation technologies, businesses can gain valuable insights about their supply chain operations to make smart decisions around cost-cutting initiatives without sacrificing quality or customer service levels.

Through careful monitoring and analysis of spending habits over time using these techniques, businesses can reap significant long-term benefits in terms of cost savings while still providing excellent value for their customers through improved efficiency across their operations.

Download PDF

What’s your goal today?

1. Use Planergy to manage purchasing and accounts payable

Read our case studies, client success stories, and testimonials.
Visit our Procurement Solutions page to see how Planergy can digitize and automate your procurement processes saving you time and money.
Learn about us, and our long history of helping companies just like yours.

2. Download our “Indirect Spend Guide”

3. Learn best practices for purchasing, finance, and more

Browse hundreds of articles, containing an amazing number of useful tools, techniques, and best practices. Many readers tell us they would have paid consultants for the advice in these articles.

The post Pareto Analysis in Procurement: How To Use Spend Analysis To Cut Costs appeared first on Planergy Software.

Predictive Analytics in Procurement For Actionable Insights

Rob Biedron — Thu, 07 Apr 2022 15:31:00 +0000

Download a free copy of "Indirect Spend Guide", to learn:

Where the best opportunities for savings are in indirect spend.
How to gain visibility and control of your indirect spend.
How to report and analyze indirect spend to identify savings opportunities.
How strategic sourcing, cost management, and cost avoidance strategies can be applied to indirect spend.

Download Free Copy

Predictive Analytics in Procurement For Actionable Insights

Category

Spend Management

Written by Rob Biedron
15 min read

Tags

Big Data Procurement Spend Analysis

Last edited

June 24, 2024

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Since the pandemic in 2020, supply chain disruptions have become more commonplace. Many procurement departments found themselves fighting against the current reactively and discovered that their internal processes needed work.

For many years, it’s been argued that your company should work toward adopting predictive analytics in procurement, otherwise known as predictive procurement.

The companies that have come out on top as a result of the pandemic chaos are those that made the shift from being reactionary to proactive.

Those that have failed to shift are those currently struggling to survive.

Understanding how and why shortages happen, along with the relationship between supply chain and procurement, and how your organization’s internal procurement processes can be structured and improved to alleviate supply chain disruptions are mission-critical in 2022 and beyond.

Data analysis helps to capture better prices, improve order fulfillment speed and more. With automated processing, you can control spend and improve the bottom line. Predictive analytics ensures you’re ready no matter what scenario becomes reality.

Predictive procurement, also known as predictive sourcing, is more than the latest trend in procurement. It’s how today’s procurement functions can stay relevant and keep their businesses operating smoothly in the face of uncertainty.

Every procurement team tries to stay ahead of the market.

They know how important it is to lock in suppliers at advantageous prices when signs point to big changes in demand or potential disruptions across the supply chain.

The truth is that humans and basic software can’t address all possible variables. That’s where predictive analytics and digital transformation come into play.

What is Predictive Analytics?

According to Investopedia, predictive analytics is “ the use of statistics and modeling techniques to determine future performance based on current and historical data.”

It uses your current and historical data patterns to determine the likelihood of these patterns emerging again in the future.

It allows investors and businesses to adjust their resource usage and allows them to take advantage of possible future events.

It also empowers them to improve operations and reduce risk.

How Predictive Analytics Helps Procurement

In procurement specifically, predictive analytics uses data from your spend management, supplier information, and raw materials data to perform analysis and determine patterns while predicting future trends and outcomes.

The insights you get from this type of analysis can be used to improve supplier management and supplier relationships, find opportunities for cost savings, boost sustainability, and more.

Predictive analytics helps procurement by helping to control expenditures and improving outcomes associated with your spending.

Using predictive analytics makes it possible for procurement teams to identify patterns within the organization and predict a variety of future scenarios.

This way, you know how to respond should one of these predictions become reality. It allows for faster, more accurate decision-making overall. By knowing what potential challenges you could face in the future, you can be ready for nearly anything as it happens.

Let’s take a closer look at three specific ways data analysis can help your procurement department.

Improve Your Spend Analytics Process

In the past, procurement staff has had to deal with multiple databases filled with both structured and unstructured data.

Even the best of the best have to be able to consolidate this information and analyze it in one place.

The insights enable teams to combine expected fluctuations in supply and demand with various real-world environmental factors to create scalable pricing models.

Applying big data analytics allows procurement leaders to combine diverse data sets into a comprehensive analysis.

Based on the analysis, teams can find opportunities to reduce spend and improve the company’s profit margin.

For instance, using spend analytics with a $200 million annual budget, PPG Industries was able to reduce their indirect spend by 95% using central visibility. They also were able to reduce suppliers by 90% And capture a 10% hard dollar savings overall.

With the data analysis, it’s possible for your organization to make the best possible decision by incorporating risk analysis into your decision-making process.

By generating data related to compliance risk, geographical risk, pricing, and preventive measures, your team can better anticipate future issues with the supply chain.

Demand Forecasting Optimization

If your business isn’t prepared for a change in demand, you won’t be able to take advantage of the best possible prices which could strain supplier relationships as they struggle to meet your short-term requirements.

Major increases in demand may be cyclical and happen fairly often.

Companies that ensure stock availability is managed will always be prepared for the spikes (and the plunges.)

However, fluctuations in demand don’t always happen predictably as evidenced by the pandemic.

In addition to the supply chain disruptions, we’ve also seen changes in consumer behavior which forced procurement experts to gain better visibility into mission-critical parts of their supply chains as fast as they possibly could.

Data analytics is useful when it comes to both recurring and unexpected factors to make it easier to accurately forecast demand in a way that benefits the procurement staff as well as the entire business.

Improve Your Supplier Management

Data analytics is also helpful when conducting comprehensive supplier evaluations. It can take into account various elements such as quality of goods and services, cough, and the rate of on-time delivery.

A well-organized analytic system allows vendors to be evaluated and ranked on all relevant aspects of their offerings and compared.

This allows teams to find the most effective supplier solutions whether it be vendor consolidation, or changing open-market transaction-level.

You can also use it to effectively manage contracts, forecast liabilities, and optimize discounts.

How Your Company Can Make the Switch to Predictive Procurement

Edmond Zagorin founded bid Ops in 2017. bid Ops is known as the first company to use artificial intelligence to completely automate supplier negotiations.

Sagarin was frustrated with how much manual data entry was involved and the traditional procurement software needed to fully execute strategic sourcing.

This is where Bid Ops “Five Ps” come into play. They are: People, Process, Predict, Prioritize, and Produce.

People

Bid Ops says that people are often overlooked. People run every organization’s procurement department from the chief procurement officer to the most recent hire on the sourcing team. Many businesses take the people and procurement for granted, which is a mistake.

If one of your business goals is to become a high-performing organization, invest in your talent strategy early.

By investing in training and development for your staff, you can build the foundation you need for success.

Data shows that consultants who have adopted advanced strategies including predictive procurement have an easier time attracting top talent.

Process

If you want your organization to make predictive procurement work, you must be willing to analyzing update your processes.

If you’re using outdated processes such as tracking everything in a spreadsheet, it will be hard for your predictive procurement strategy to remain effective.

It’s crucial to adopt new processes to support your protective procurement initiative because you get the bonus of moving your staff away from manual repetitive tasks to less mundane and more challenging value-added tax.

The process is used are also an important part of attracting the best people to your organization.

The same research suggests that high performers are up to five times more likely to have fully deployed advanced analytics, 10 times more likely to have fully deployed robotic process automation solutions, and have fully deployed predictive analytics capabilities.

They’re also 18 times more likely to have fully deployed AI capabilities.

AI is a key tool for keeping your processes modern and enabling predictive procurement.

Predict

Kait Reis, digital marketing manager for Bid Ops says, “Historically, much of what a procurement organization did has required making cognitive judgments.”

As the amount of data procurement teams produces continues to increase, if you’re looking to predict at scale, you will benefit from using AI. With big data, it’s impossible to rely on human data analysis.

The technology scans massive amounts of data fast and has the ability to grade outcomes for nearly any process or variable.

Outliers can be flagged for human intervention. Anomaly detection and forecasting KPI reports are necessary to enable prediction.

Prioritize

If you don’t take the time to prioritize, it’s difficult to adopt predictive procurement. The issue is that your organization and even your CPO can spend all day focused on transactional busy work.

These tasks, are often repetitive and dull making it easy for errors just show up.

If you want to be successful with predictive procurement, you have to prioritize tasks that are higher in value.

Put your staff on the value-added task and your entire procurement team operates more strategically allowing them to become more involved in the business process.

Machine learning and AI take care of the dull and repetitive stuff for you with automation.

With the help of procurement solutions like Planergy, you can feed reliable, accurate data into the analysis to ensure you’re on the right track at all times.

Produce

By combining prediction and prioritization, procurement functions can improve the results.

Your goal is to drive more outcomes that are optimized over time.

With prediction catching and correcting the outliers, and prioritizing everything so that your skilled procurement team can focus our efforts on your high leverage activity see, you always get better outcomes in the long run.

Before you can take advantage of predictive analytics and procurement for your organization, you must first cleanse your data.

If the fundamental data at the base of the entire process is inaccurate, then the outcomes will also be inaccurate.

After you know you have clean and accurate data, you should work on identifying correlations between the drivers and prices.

From there, you need to establish a warning system that highlights any unnecessary price deviation. Finish implementation by generalizing your required forecast methods.

Organizations that take action to implement predictive analytics now will be miles ahead of the competition that fails to move.

While predictive procurement is currently an early trend, it will soon become an industry standard. If your company is prepared, you’ll have a competitive advantage.

Download PDF

What’s your goal today?

1. Use Planergy to manage purchasing and accounts payable

Read our case studies, client success stories, and testimonials.
Visit our “Solutions” page to see the areas of your business we can help improve to see if we’re a good fit for each other.
Learn about us, and our long history of helping companies just like yours.

2. Download our guide “Indirect Spend Guide”

Download a free copy of our guide to better manage and make savings on your indirect spend. You’ll also be subscribed to our email newsletter and notified about new articles or if have something interesting to share.

3. Learn best practices for purchasing, finance, and more

Browse hundreds of articles, containing an amazing number of useful tools, techniques, and best practices. Many readers tell us they would have paid consultants for the advice in these articles.

The post Predictive Analytics in Procurement For Actionable Insights appeared first on Planergy Software.

How To Create Savings With Better Spend Management In Procurement

Rob Biedron — Fri, 25 Mar 2022 16:12:20 +0000

Download a free copy of "Indirect Spend Guide", to learn:

Where the best opportunities for savings are in indirect spend.
How to gain visibility and control of your indirect spend.
How to report and analyze indirect spend to identify savings opportunities.
How strategic sourcing, cost management, and cost avoidance strategies can be applied to indirect spend.

Download Free Copy

How To Create Savings With Better Spend Management In Procurement

Category

Spend Management

Written by Rob Biedron
14 min read

Tags

Best Practices & Tips Procure-to-Pay Spend Analysis

Last edited

June 24, 2024

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Before we can explore how to increase your savings with better spend management, we must first take a look at what spend management is.

Spend management refers to the process of collecting, maintaining, categorizing, and reviewing spend data in an effort to reduce procurement costs.

It also aims to improve efficiency, monitor and control workflows, and maintain regulatory compliance.

The spend management process affects numerous activities throughout the procurement cycle including requisition processing, planning, budgeting, supplier and contract management, Inventory management, sourcing, and even product development.

All organizations, regardless of their size and type, should develop a spend management process.

An optimized spend management process can result in 90%+ in operational efficiency savings.

Here, we’ll explore how spend management optimization creates savings and the steps you need to take to reap those rewards.

Review Your Spend Management Process

What does your current spend management process look like? You may have tightly managed processes with a number of disparate tools.

You may have a loosely managed process using disparate tools. But, the truth is that many companies don’t have any process in place at all.

Planergy recently dealt with a public company with $50 million in spend with no system in place.

Benchmarking their spend/revenue ratio against a peer group found that their spend was 25%, while the industry average was 16.5%.

That’s almost a 10% increase in spend, due to the lack of a cohesive spend management process.

Follow Best Practices in Spend Management and Analysis

Having a process is a good start, but you need to analyze it to make sure it follows best practices.

This means it:

Is a centralized platform
Gives you full spend transparency
Integrates with your accounting software or ERP
Manages the full Procure-to-Pay lifecycle
Prevents just anyone in the organization from buying something without using the system
Allows for users to have the necessary permissions to avoid approval bottlenecks
Has budgets that are allocated to mirror a signing authority matrix
Allows you to implement appropriate approval workflows
Offers accounts payable automation
Includes three-way matching for better risk management
Makes it easy to benchmark vendors for delivery, pricing, availability, and more
Has real-time reporting and alerts for early payments and late payment penalties

Chances are your current spend management strategy doesn’t hit on all these marks – and that’s okay.

What matters is that you move away from a manual approach full of spreadsheets, phone calls, and emails, to a dedicated Procure-to-Pay Software that centralizes everything.

Why a Centralized Repository

Organization is key for any business. By storing information in a single location, there’s no more sifting through emails, hoping you’re working from the latest version of the Excel spreadsheet, or playing phone tag.

Users get access to the information they need when they need it. And with all relevant documentation – vendor invoices, contracts, etc. – everybody will be on the same page.

Files can be added to vendors, along with a full catalog of the products they offer, to speed up the ordering process.

In some organizations this will allow for better control where needed, but all organizations will benefit from the transparency in their procurement process.

Why Accounting Integration Matters

Whatever spend management or procurement platform you use it should also integrate with your accounting software or ERP.

Why? The manual process takes time and is full of error potential. AP automation saves up to 80% of the time your team spends processing invoices and prevents you from making costly mistakes such as:

Paying duplicate invoices
Paying for items invoiced, but not received
Paying for items invoiced, but received damaged or unusable
Missing the opportunity to leverage early payment discounts
Paying multiple invoices late, subjecting the company to late fees and damaging supplier relationships

If you’re spending 10 hours per week on AP, switching to automation could cut that down to two hours. Imagine what your team could do with an extra eight hours every week.

The accounting software integration also ensures that you can manage the entire Source-to-Pay lifecycle.

No more having to scan invoices into the accounting system and matching them up to the appropriate purchase order manually.

By connecting your eProcurement software to your accounting solution, you can take advantage of three-way matching.

This feature automatically checks your invoice against goods received and the approved purchase orders.

This way, you’re only paying for items you’ve ordered and received. If there’s a mismatch anywhere in the system, it gets flagged for human intervention.

For instance, if your PO contained an order for 17 new computer desks, and only 10 have been received, you’ll receive an alert before paying an invoice for all 17.

You can then check to make sure there’s not a separate shipment you’re waiting on, or that 7 desks didn’t arrive damaged.

Depending on what you find, you can reach out to the supplier to correct the issue, and submit a partial payment for what you’ve received.

A more streamlined accounts payable process also can improve your relationships with key suppliers.

Enabling you to pay on time keeps them happy but can also realize savings from early payment discount agreements or avoiding late payment penalties.

3-way matching also removes invoice approval bottlenecks caused by lack of data when using a standalone AP Automation software.

With a solid spend management process comes better spend visibility. And with that, you have better decision-making capabilities.

User Permissions and Approval Workflows

If your current process makes it easy for anyone to purchase anything, without having to go through a specific process or software, you’re in trouble.

Your business could be losing tons of money through maverick spend – or purchases made outside of your company’s designated purchasing process, duplication of orders.

Profit leak in spend management is often death by 1,000 cuts and without spend visibility and correct approval workflows this can add up to big overall impact on cash-flow and profit.

With user permissions, you can designate certain capabilities to each employee based on what their job function requires.

Department heads may be in charge of approval at one level, where certain thresholds require approval from the department head and their supervisor.

Whereas the office manager may be able to approve certain types of indirect spend like office supplies. Some basic supplies or dollar amounts may not require any approval.

How you set up user permissions and approval workflows depends on the nature and size of your business.

However, granular controls ensure that each department follows budgets, and can even limit purchases to certain suppliers or products for better category management.

The approval workflows ensure that no purchase requisitions or purchase orders sit in a pile or get lost on someone’s desk as it moves from one person to another.

With workflow rules, you can set spending thresholds, individual item dollar amounts, etc. to determine who has to approve what and when.

Reporting and Forecasting

Sure, reporting can be done with Excel, if you’re a whiz when it comes to formulas.

But, when you’re working with multiple people and multiple versions of the same data, you can’t be sure you’re dealing with accurate spend data – and that can throw a wrench in things.

Real-time reporting and spend analysis are crucial for managing a company’s spend.

The spend analytics data is a key part of spotting savings opportunities, making data-driven decisions, and even improving supplier management.

If reporting finds that you’re spending more in certain spend categories than you expected, you can dig deeper to find the root cause.

Is it because a supplier you contracted with as part of your strategic sourcing initiative isn’t holding up their end of the deal? Is it because costs are higher than you initially planned for? Is it because your previous approval process allowed for unnecessary spending?

Whatever the case may be, the report data can help you and stakeholders determine the next course of action to help you reach your business goals.

Data management based on historical spend is important to help you see how you’ve done in the past, but report and data standardization can also be helpful when it comes to forecasting the future.

For instance, if business stays relatively the same from month to month, you can compare sales data to the prior month to determine profitability.

You look for ways to save money and reinvest it in other areas of your business. Seasonal businesses can use year over year comparisons for the same thing.

Effective Spend Management Starts with Digital Transformation

To keep up with your competition, you must have a solid procurement strategy. But if that procurement strategy doesn’t involve using digital tools to help procurement teams, then you won’t be able to execute that strategy to the best of your ability.

Procurement process optimization begins by analyzing what you’re currently doing and finding ways to improve it.

You can’t get to where you’re going if you don’t know where you are.

It’s only when you have the right spend management solution in place that you can start to reap the cost savings.

When you take money you save and combine it with the time your procurement and AP teams save, you’ll be able to invest in other initiatives that improve your cash flow and your bottom line.

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What’s your goal today?

1. Use Planergy to manage purchasing and accounts payable

Read our case studies, client success stories, and testimonials.
Visit our “Solutions” page to see the areas of your business we can help improve to see if we’re a good fit for each other.
Learn about us, and our long history of helping companies just like yours.

2. Download our guide “Indirect Spend Guide”

3. Learn best practices for purchasing, finance, and more

Browse hundreds of articles, containing an amazing number of useful tools, techniques, and best practices. Many readers tell us they would have paid consultants for the advice in these articles.

The post How To Create Savings With Better Spend Management In Procurement appeared first on Planergy Software.

Procurement Maturity Model: Steps To Maximizing Value In Business Spend

Rob Biedron — Mon, 26 Jul 2021 15:18:16 +0000

Download a free copy of "Indirect Spend Guide", to learn:

Where the best opportunities for savings are in indirect spend.
How to gain visibility and control of your indirect spend.
How to report and analyze indirect spend to identify savings opportunities.
How strategic sourcing, cost management, and cost avoidance strategies can be applied to indirect spend.

Download Free Copy

Procurement Maturity Model: Steps To Maximizing Value In Business Spend

Category

Spend Management

Written by Rob Biedron
17 min read

Tags

Procurement Spend Analysis Strategic Sourcing

Last edited

June 5, 2024

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While commerce has boiled down to “buy and sell” since the concept was born, the art of doing business effectively continues to evolve over time.

In the modern global economy—fast-paced, data-driven, and increasingly complex—procurement organizations are quickly becoming a primary driver of not just cost savings, but strategic value.

The “buy” half of the commerce equation has become, with help from automation, analytics, metrics, and other emerging technologies, a core component of successful digital transformation.

In order to reap the benefits of true digital transformation, however, companies need to understand the procurement maturity model and apply it effectively in evaluating their current procurement processes.

By understanding how their procurement organization impacts the enterprise as a whole, they can improve their procurement strategies, set and reach goals for higher levels of maturity, and achieve the procurement transformation that is essential to true digital transformation.

What is the Procurement Maturity Model?

While it would be nice (and certainly more convenient) for companies to implement fully mature procurement organizations that spring forth like Athena from the forehead of Zeus, in practice every company has its own unique procurement situation and capabilities.

Well-established, brick-and-mortar companies with a long history of manual workflows and prioritizing cost savings will have a different starting point on the road to full procurement maturity than a fully virtual start-up run by digital natives, for example.

Regardless of their current procurement functionality and capabilities, however, procurement organizations can achieve truly strategic procurement and spend management that drive both value and innovation for their companies through self-assessment and careful optimization of their procurement processes.

The procurement maturity model is used to help companies set and reach goals for optimizing business processes in their procurement function and implementing both procurement transformation and enterprise-wide digital transformation supported by it.

Achieving procurement maturity begins with a procurement capabilities assessment, also called a procurement maturity assessment.

This stage is effectively needs analysis, wherein procurement professionals use assessment tools and methodologies to determine:

The organization’s current practices and controls for the Procure-to-Pay process.
The ways in which the organization’s procurement processes affect its capabilities in generating cost savings, value, and strategic insights for the enterprise.
New goals the organization sets for moving procurement into a more mature and strategically valuable role by improving its capabilities in key areas.
The tools, techniques, and training required to help the procurement function, and the enterprise, achieve these goals.

The procurement maturity model starts with traditional (tactical) procurement and evolves toward best-in-class (also called world-class) procurement capabilities.

It provides a clear overview of the ways procurement professionals can deliver more value to their organizations over time by improving the procurement department’s functionality and efficiency in key areas.

Incorporated into the procurement maturity model is the procurement capability maturity model, which specifies the capabilities characteristic of, and required to achieve, each stage of procurement maturity. As procurement capability increases, so too does procurement maturity.

The stages of the model are:

1. Tactical and Operational Procurement

Procurement organizations at this stage are still reactive, rather than proactive. They’re focused on cutting costs, securing goods and services at the lowest possible price at the time of purchase, and making sure invoices get paid accurately and on time.

At this level, procurement may not even be a dedicated function, but rather an ad hoc procedure. Staff source and purchase their own goods and services, with Finance (accounts payable) burdened with trying to keep these purchases within budgetary limits while simultaneously paying invoices and tracking spend as best they can.

These organizations don’t have full visibility into, or control over, their spend.

Software solutions that help teams with contract management, inventory management, Procure-to-Pay (P2P) optimization, or spend management are totally absent. Analytics, if present, are provided by the company’s enterprise resource solution (ERP) and focused on expense accounts in the general ledger.

Tactical procurement helps minimize costs in the short term but doesn’t provide the tools, controls, or infrastructure required to generate value, provide insights, or reduce risk for an organization.

World-class procurement teams have full control over the Big Data flowing through their organizations, and by analyzing data streaming from a wide variety of internal and external sources, provide rich, detailed insights that guide decision-making on multiple fronts.

2. Strategic Sourcing Procurement

Companies at this level of procurement maturity are beginning the journey to generating substantial value through business spend management.

They employ dedicated procurement professionals to develop and implement policies and controls for core procurement processes such as purchasing, contract management and negotiation, and the strategic sourcing process.

These organizations leverage the power of strategic sourcing, engaging in much more proactive supplier management.

They use sourcing events to take advantage of optimal pricing through economies of scale and negotiated terms.

They approach supply chain management with an eye toward both savings and value, and implement procurement strategies that help protect business continuity and competitiveness through supply chain resilience.

Procurement departments at this stage recognize the importance of collaborating with finance to streamline and optimize the Procure-to-Pay process.

They invest in software solutions that include automation and analysis tools to develop and enforce spend management policies.

They set benchmarks for, and use key performance indicators (KPIs) to analyze, vendor performance and compliance.

And through the use of artificial intelligence, process automation, and centralized data management, obtain full control over and visibility into their spend.

These organizations generate value for their companies through:

Long-term savings from more effective contract management.
Improved operational efficiency across the P2P process.
Better risk management through tighter controls and the elimination of rogue spend and invoice fraud.
Better spend control through guided buying.
Improved supplier relationship management and more effective sourcing processes.

3. Strategic Category Management Procurement

At this stage, organizations are ready to build on the success and value created through strategic sourcing.

They want to expand their capabilities to include advanced category management, as well as more advanced data analytics and modeling.

The procurement department expands to include dedicated category specialists.

These procurement professionals focus all their skills and time on specific spend categories in order to secure maximum return on investment and develop strong, strategic supplier relationships that build value through not just reduced costs, but new opportunities for shared success and innovation (e.g., developing new products sourced with more sustainable materials, strategic partnerships in manufacturing, etc.).

These companies rely on robust, centralized software solutions that include advanced analytics and robotic process automation to manage spend, create accurate and complete forecasts and budgets, and deliver actionable insights senior management can use to make more strategic decisions.

The datasphere is fully integrated, and standardization and automation eliminate data silos to promote better collaboration and communication between stakeholders.

Beginning at this stage, organizations can take advantage of a project management model known as RACI (Responsible, Accountable, Consulted, Informed) to obtain the best possible results from category, supplier, and spend management.

The RACI system helps teams evaluate opportunities and obtain optimal results through careful assessment and analysis of available data, and is best executed with support from software tools.

At this level, procurement organizations have advanced supplier management capabilities and a focus on building supply chains that are both resilient and agile, with the flexibility to capture value from unexpected opportunities and the strength to weather business disruptions.

They use their know-how to advise leadership within the company, guiding their organizations to greater competitive strength and profitability.

4. World-Class or Best-in-Class Procurement

A trusted partner and highly valued source of strategic value and innovation, procurement organizations at this stage have fully aligned procurement’s goals with the company’s and provide the data and insights that fuel enterprise-level initiatives.

Procurement transformation directly powers enterprise-wide digital transformation at this level, and the chief procurement officer (CPO) is a powerful source of strategic leadership.

Continuous improvement through iterative process optimization makes procurement a source of ever-growing savings and value.

World-class procurement teams have full control over the Big Data flowing through their organizations, and by analyzing data streaming from a wide variety of internal and external sources, provide rich, detailed insights that guide decision-making throughout the value chain.

Procurement strategy is tightly aligned with organizational planning at this stage.

Category management and supplier relationship management are collaborative and proactive, enabling the company to seize opportunities to negotiate optimal terms, develop new products to meet changing consumer demand while keeping costs low, and target new areas for growth with confidence.

The datasphere integration achieved at the Category Management level has been further enhanced. A single platform provides control over all areas of procurement and spend management.

Historical spend data, diverse data sources from multiple locations, and financial models are used to set goals and benchmarks, evaluate performance and compliance, and reduce risk. Return on investment is viewed through the lens of total cost of ownership.

Improving Your Procurement Maturity

Understanding where you are, where you need to go, and what you need to do to get there is just the beginning.

But whether you’re just starting your procurement maturity journey or looking to level up, you can enhance your procurement maturity by following a few simple best practices.

Craft Your Procurement Strategy Based on Your Actual Needs and Capabilities

Having performed a procurement maturity analysis and finding you’re a bit behind the curve, it might be tempting to go full-throttle in an attempt to keep up with the Joneses.

But long-term digital transformation success depends on strategic change management. Changing too much, too quickly can not only tax your budget, but create costly chaos that can hamper, rather than help, your procurement transformation plans.

Carefully consider not just the competition, but your company culture, budget, and long-term goals for growth. Starting with the areas most in need of optimization (e.g., the Procure-to-Pay process) can provide a solid foundation of value and savings you can build on over time.

Simply centralizing data management and incorporating process automation can provide the perfect launchpad for more ambitious efforts down the road, and allow you the breathing room you need to establish new protocols and policies and secure buy-in and compliance from everyone in your organization.

Don’t Be Afraid to Invest in Best-in-Class Technology

While it’s crucial to let your budget and capabilities guide your procurement strategy, making the decision to invest in a top-shelf, centralized P2P solution such as Planergy as soon as is reasonably possible is a smart way to ensure the long-term success of your procurement and digital transformation initiatives.

Think of it this way: procurement maturity relies on generating value and innovation in the long term.

Shifting procurement to do so requires high-quality, reliable, and transparent spend data.

A centralized, cloud-based software solution that streamlines your business processes, standardizes and secures information exchange, and provides full control over your spend data is key to turning data into decisions.

Transform Your Business with True Procurement Maturity

The journey to procurement maturity takes time, skill, and dedication.

Take the time to perform a procurement maturity assessment, then create the procurement strategy that best fits your goals for helping the procurement team become a trusted and invaluable source of value for your business.

By optimizing your procurement processes and implementing the tools, controls, and policies you need to succeed, you can transform your procurement department into a powerful engine for value, innovation, and digital transformation throughout your organization.

Download PDF

What’s your goal today?

1. Use Planergy to manage purchasing and accounts payable

Read our case studies, client success stories, and testimonials.
Visit our “Solutions” page to see the areas of your business we can help improve to see if we’re a good fit for each other.
Learn about us, and our long history of helping companies just like yours.

2. Download our guide “Indirect Spend Guide”

3. Learn best practices for purchasing, finance, and more

Browse hundreds of articles, containing an amazing number of useful tools, techniques, and best practices. Many readers tell us they would have paid consultants for the advice in these articles.

The post Procurement Maturity Model: Steps To Maximizing Value In Business Spend appeared first on Planergy Software.

Common Procurement Reports That Drive Value

Lyle Del Vecchio — Mon, 12 Jul 2021 13:29:37 +0000

Download a free copy of "Indirect Spend Guide", to learn:

Where the best opportunities for savings are in indirect spend.
How to gain visibility and control of your indirect spend.
How to report and analyze indirect spend to identify savings opportunities.
How strategic sourcing, cost management, and cost avoidance strategies can be applied to indirect spend.

Download Free Copy

Common Procurement Reports That Drive Value

Category

Spend Management

Written by Lyle Del Vecchio
17 min read

Tags

Procurement Spend Analysis Spend Visibility

Last edited

December 19, 2023

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The procurement department is quickly becoming a key player in building and maintaining growth, value, and competitive strength for businesses in all industries. Companies are eager to tap into the powerful insights hidden within their procurement data in order to make better business decisions, and rely on data-driven procurement tools to reveal and leverage those insights appropriately.

Common procurement reports are some of the most powerful and basic tools available to chief procurement officers (CPOs) and other procurement leaders as they align procurement strategy with organizational goals and seek to center their departments as value creators. With a thorough understanding of what these reports are and how they work, procurement teams can achieve significant cost reduction and create a cascading chain of value throughout their organizations.

Common Procurement Reports: Overview

Procurement departments use procurement reporting (called eProcurement reporting when performed using digital tools and using digital sources) to refine the raw ore of spend data into polished ingots of actionable insights. Reports are any document providing useful information. They combine text with tables and graphics to make the data more readily digestible.

Procurement reports are most often generated on a periodic basis, but organizations who’ve invested in procure-to-pay optimization software can generate them easily on demand.

Some of the most common types of eProcurement reports include:

Spend reports help with budgeting, audits, and reporting, with versatile levels of granularity based on context. They can be used to compare actual spend to approved budgeted values, get a clear picture of the company’s overall financial footing in real time, help with cash flow management, and more.
Supplier base reports help track the details of how much is being spent with which suppliers, as well as approvals, inventory and usage statistics, etc. These reports are most useful when all spend information is available, from the original purchase requisition to the final supplier invoice confirmation and payment. By tracking spend related to each vendor in the supply chain, companies can improve their sourcing strategies to streamline their supply chains for resilience and flexibility while still capturing cost savings and protecting business continuity.
Category analysis reports are a specific type of supplier report. By sorting, managing, and analyzing data for materials, goods, and services via category management, companies can gain a much richer understanding of spend, more effectively monitor supplier performance and compliance, and seize opportunities to invest in innovation and growth.
Accounts payable (AP) reports contain valuable information related to spend activity, providing accurate figures for committed spend, accruals, goods received but not invoiced (GRNI), etc. The more accurate and complete a company’s procurement data is, the more useful it will be downstream for AP in generating reports and forecasts of their own.
Contract management reports present analyses of supplier contracts and relevant ancillary data, as well as compliance and performance information. They provide additional guidance in trimming bloat from the supply chain, adding necessary context-relevant redundancies, and identifying opportunities to partner with the company’s best suppliers on mutually beneficial initiatives.
Procurement benchmarking reports examine actual performance against internal benchmarks, industry standards, peer performance, etc.
Savings lifecycle analysis reports are used to evaluate the effectiveness and efficiency of cost savings initiatives over their total lifespan.

In the past, procurement analysis was performed primarily by business analysts specializing in spend analysis, using Microsoft Excel spreadsheets, paper documents, and manual workflows. Over time, the process has evolved to match available technology.

The Value of Procurement Analytics

Typically, eProcurement reports use procurement analytics to contextualize information. Also called spend analytics, they reveal patterns, problems, and potential opportunities hidden within procurement data and are used to create a procurement strategy that addresses all three.

In the past, procurement analysis was performed primarily by business analysts specializing in spend analysis, using Microsoft Excel spreadsheets, paper documents, and manual workflows.

Over time, the process has evolved to match available technology. Automation and analytics have replaced pen, paper, and tedious, error-riddled manual processes.

Today, a company implementing a best-in-class, centralized procure-to-pay solution such as Planergy has access to:

Advanced procurement analytics powered by artificial intelligence (AI)—specifically, machine learning that improves performance and accuracy over time.
A diverse set of data sources, fully integrated within a central data management platform.
Process automation to improve functionality, speed, and accuracy while eliminating delays and human error.
Real-time visibility into spend data for more timely and accurate forecasting and reporting.
Report templates for greater speed, convenience, and accuracy.
Speed, safety, and reliability thanks to Software-as-a-Service (SaaS) delivery, built-in data encryption, and mobile-friendly, secured access.

Types of Procurement Analytics

Procurement analytics take various forms fall broadly into four categories of spend analysis:

Diagnostic analytics are used to mine existing historical data to help procurement leaders:
- Understand long-term trends;
- Examine the nature of unaddressed challenges and unexploited opportunities;
- Develop new procurement strategies and forecasts informed and enhanced by understanding this historical data to boost value, performance, compliance, savings, and profitability.
Descriptive analytics are the “what” to diagnostic analytics’ “why and how.” They describe past performance in intricate detail.
Predictive analytics are future-focused. Descriptive analytics provide a clear and transparent understanding of past data; diagnostic analytics mine the data so clarified for insights; and predictive analytics use those insights in forecasting future procurement performance.
Prescriptive analytics are the “solutions” phase of analysis. Using analyzed procurement data and the forecasting models developed from it, CPOs and other procurement leaders can make more strategic, timely, and value-focused business decisions with confidence.

Analytics capture data from a broad and diverse set of sources, both internal and external.

These include:

Procurement-focused key performance indicators (KPIs) and other metrics being tracked by the organization, such as:
- Total cost of ownership;
- Spend under management;
- Bottom line gains achieved via both cost savings and cost avoidance.
- Supplier availability;
- Supplier defect and compliance rates;
- Purchase order cycle time;
- Average cost of processing a purchase order.
- Performance management benchmarks for internal controls and workflows.
Input from other applications in the company’s software environment, including:
- Accounting software;
- Enterprise resource planning (ERP) suites;
- Office applications such as Microsoft Excel and Access;
- Customer relationship management (CRM) platforms.
Diverse external data sources, including:
- General Internet-based information, e.g. currency rates, market trends, commodity information.
- Proprietary industry, market, and financial information.
  - Supplier industry codes.
  - Credit rating information.
  - Risk exposure profiles.
  - Industry or government compliance updates.
- Social media, mainstream media updates, and direct consumer feedback relevant to issues such as sustainability and ethical business practices and their impact on the price and use of materials, services, etc.

Any given procurement report will likely include analyses drawn from all four categories, and will ideally be built using as much relevant information as is available. Clean, accurate, and complete data from optimized procurement processes provides the best, most strategically useful insights that are so essential to strategic planning and decision making.

Procurement Analysis: Turning Data into Procurement Reports

The actual analysis process is fairly straightforward. But in examining its particulars, it quickly becomes clear just how important digital tools such as artificial intelligence and automation are to getting optimal results.

Phase One: Extract the Data

Drawing from all available sources, the data is collected, organized, and consolidated into a single central database. This data in this phase is the “raw ore,” ready to be refined into insights and information that’s readily absorbed and put to strategic use.

Phase Two: Clean, Categorize, and Enrich the Data

In this phase, the data is standardized and organized, eliminating file format conflicts, removing errors and redundancies, and enhanced through enrichment tools such as translation (e.g., between languages) or conversion (e.g., to a single currency).

Phase Three: Analysis and Reporting

Cleaned, organized, and readily accessible, the data is now ready to be analyzed. The resulting insights can be further organized into reports using text, graphics, and tables, and provide as much or as little granularity as is desired.

Best Practices for Procurement Reporting

Investing in a purpose-built P2P solution is the best first step you can take for optimal cost savings and value creation through procurement reporting.

The best second step is understanding how to structure reporting and manage your data to maximize those savings and value.

Procurement teams can further improve their results by following a few basic best practices.

1. Consider How Procurement Provides Value to Your Organization

Companies who are actively repositioning procurement to drive value via enterprise-wide process optimization and spend control will have a somewhat different approach than those who rely on it for strategic guidance and holistic value creation rather than cost alone.

In clarifying the procurement department’s role in the organization and the best way to leverage procurement reporting, it’s helpful to ask:

What is procurement’s current strategic role in the organization? Strictly “back office” or “spend cops”, or has the company already altered its business processes to incorporate procurement data as part of its strategic planning?
Is procurement responsible for the bulk of direct and indirect spend for the organization?
Is the company a manufacturer? Retailer? Service-based?
How collaborative is procurement with the internal stakeholders that serve as its customers?
What is the existing level of collaboration present between members of the C-suite and the business functions they lead?
How significant would the damage to the bottom line and business continuity be if procurement and its supply chain were cataclysmically disrupted?

The answers to these questions will help guide you as you craft your reporting structure. For example, a business that relies heavily on procurement to protect both business continuity through the supply chain and the bottom line through cost savings and value will benefit from direct reporting to the chief executive officer (CEO) or chief operations officer (COO) as well as the CPO, and prioritizing enterprise goals.

On the other hand, companies where procurement provides strategic guidance and a strong relationship with internal stakeholders might provide value and savings through optimizing spend managed by its customers and prioritizing more effective budgeting and forecasting for reporting to the CPO.

2. Prioritize Spend Transparency

When you have real-time visibility into all of your spend data, it’s much easier to manage everything from cash flow to the procure-to-pay process. Procurement organizations who make transparency a priority will reap the benefits in more strategically useful insights and reporting.

Set and enforce clear procurement policies.
Document and monitor all phases of the source-to-pay process, using KPIs to set benchmarks and modify processes as necessary.
Practice proactive, communicative, and collaborative supplier relationship management, contract management, and supplier management. Miscommunication and lack of visibility into all areas of your sourcing can lead to costly errors that increase total cost of ownership and eliminate opportunities to capture savings or build value.
Make process and data auditing part of your regular workflows to keep data clean and ensure small complications or errors don’t become major financial or operational headaches.

Transform Procurement Data into Value and Savings

Every day, your procurement activities generate a wealth of data. Shouldn’t you be putting it to good use? It’s time to separate the strategic wheat from the chaff when harnessing the power of your procurement data.

Invest in the procurement software tools you need for access to top-tier data management, procurement analytics and reporting, and comprehensive spend management. The insights you uncover will help you optimize your processes, provide invaluable data for accounts payable reporting, and drive value and savings throughout your organization through more strategic sourcing and spending.

Download PDF

What’s your goal today?

1. Use Planergy to manage purchasing and accounts payable

Read our case studies, client success stories, and testimonials.
Visit our “Solutions” page to see the areas of your business we can help improve to see if we’re a good fit for each other.
Learn about us, and our long history of helping companies just like yours.

2. Download our guide “Indirect Spend Guide”

3. Learn best practices for purchasing, finance, and more

Browse hundreds of articles, containing an amazing number of useful tools, techniques, and best practices. Many readers tell us they would have paid consultants for the advice in these articles.

The post Common Procurement Reports That Drive Value appeared first on Planergy Software.

Agile Business Intelligence and Analytics

Keith Murphy — Mon, 25 Jan 2021 16:19:04 +0000

Download a free copy of "Preparing Your AP Department For The Future", to learn:

How to transition from paper and excel to eInvoicing.
How AP can improve relationships with your key suppliers.
How to capture early payment discounts and avoid late payment penalties.
How better management in AP can give you better flexibility for cash flow management.

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Agile Business Intelligence and Analytics

Category

Business Strategy

Written by Keith Murphy
16 min read

Tags

Agile Business Intelligence (BI)Spend Analysis

Last edited

May 9, 2024

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A lot of business users complain about reporting and analytics because they took a lot of time to develop with the ITT in.

Research has discovered that traditional business intelligence is not able to provide quick reporting solutions to Industries in today’s competitive world.

Organizations are spending a lot of resources on modeling data and it appears that models have involved the approach changes. A huge undertaking to do it again in the problem is too big to find a solution.

The difficulty of distributing business intelligence applications to managers and executives means that they are not able to make the right decisions.

As such, it is essential that another development approach is necessary. It is a wide and growing opinion that the need for agile BI is here.

Agile Analytics, also referred to as agile business intelligence, is the term used to describe methods software developers use in analytical processes in business intelligence to establish flexibility, adopt new business demands, and improved functionality in terms of business intelligence and analytics projects.

Agile BI is a recurring process that requires continuous development of online data visualization, dashboards, reports, and new functionality to keep current processes optimized while also developing new ones.

By adopting agile development, business intelligence projects are broken down into smaller projects. The goal is set for small businesses large businesses alike to help companies adapt to business goals and constantly changing market conditions.

Today’s business landscape demands self-service BI applications that provide information in real-time.

Benefits of Agile BI

Agile methods grew from real-life experience. It is becoming more successful when applied to BI analytics and reporting.

It offers many benefits, which is why it has become more popular in recent years.

Project Transparency

Keeping business users involved with the project team ensures they understand the workings of the development process.

As such, they typically take more ownership of the solution. Sponsors can get a realistic idea of where the project stands, allowing them to quickly address issues, challenges, and risks.

Easy to Deliver

With agile BI, it’s possible to deliver products within a shorter amount of time, with different iterations.

Each iteration is made of independent software deployed for production. Agile BI focus on project separation.

The business defined scope and value drives the agile BI. The project timelines are tracked in smaller units, and customers pay for a specific amount of time.

High Return on Investment

Organizations that use agile BI get a higher return on investment (ROI) because of the shorter development cycles.

Agile BI doesn’t take as many IT resources and allows companies to spend less time delivering results to customers.

Customers and other uses are satisfied because there is continuous delivery of usable software.

Sharing and Collaboration

Agile BI includes sharing collaboration that helps the development team and business users.

There is the chance to train business users with BI tools during the project. As more interaction occurs, they can build skills in the tools to use them to their highest possible advantage.

Decision-Making Resources

Adding agile BI tools is a powerful way to support your current decision-making resources.

Using the arm resources at the initial level isn’t high but it also comes with low maintenance costs.

They provide maximum value because they help users find important information to support their decision.

Keys to Success with Agile BI and Analytics

Agile Leadership

If you want your agile business intelligence project to be a success, you must have a talented scrum Master.

The scrum Master is the one who manages the project scope and ensures that there is enough time available to prioritize tasks and avoid scope creep.

Skilled and Trained Staff

One of the largest factors for the completion of agile BI projects is the involvement of a cohesive, trained project team that works collaboratively.

Daily collaboration helps the team to address a mix of personalities and skills to be addressed early in the process.

Business Trust

It is hard to gain business trust, but if we can gain their trust, then any business users can easily work with the company.

On the business side, it is crucial to have someone with Professional Knowledge and authority to help navigate any daily challenges that come up on any of the BI projects.

The business Caesar has to be able to perform roles and responsibilities for reporting power users and to undergo the necessary training at the completion of the project.

Problems with the Traditional Waterfall Approach

The waterfall method has been used for many years in the system for the development of life cycle to create a network.

The system is referred to as a waterfall because each step depends on the others in a downward approach.

Each model is divided into different phases and every end step becomes the beginning of the next phase.

Every event must be accomplished before the next one can begin and there is no coinciding with the phases.

That leads to a number of problems, such as:

The model not accommodating changes
Necessary to complete steps before moving forward
The downgrading of the system audit at the last phase of development
Difficulty justifying required costs in resources

What’s Necessary for Agile BI and Analytics Development?

As you can see, agile BI development is clearly a successful approach to project development, compared to traditional BI.

Let’s take a closer look at what steps you need to take for agile BI development.

Chooses the Right BI Software

Agile BI helps in choosing the right tool or software for specific projects.

With a traditional approach, iterations take longer if your devices are difficult to use, don’t work together with other systems and data sources, or are cumbersome. Modern agile BI overcomes all of these issues.

Get Business Users Involved

Involving business users is difficult at every stage of development in a project but agile business intelligence makes it possible.

In agile, both business users and product owners experienced team progress at regular intervals throughout the entire process. Increased business user input means better overall business about you.

Generally, you have to collaborate with business users to update the solution based on their feedback and they want to be part of the project.

When working with business users, remember that they have to be flexible and you need to value them. With that approach, you can save time and still deliver quality products.

Changes in the Process

Any change in requirements in the middle of a project is a major issue for the business intelligence team.

If they are not in development as per the requirement, there is a competitive advantage.

Introducing agile bi makes it possible to update the requirements at any level of BI product development, keeping things flexible for everyone involved.

Automation

automation plays a significant role in making the agile BI method successful.

Building automation helps in three production environments where you have to build a version of your system that works perfectly.

Agile analytical tools help teams automate any processes that have to be performed more than once.

Quality Production

With agile development, IT teams can deliver quality products to businesses. Testing is necessary to deliver a quality product, and when business users or customers are satisfied with the product, it is a good thing.

Each facility will have to be tested in a timely manner and debugged to ensure the product is of high quality and ready to be delivered when the final product is ready.

Support for Collaboration

Agile BI implementation in a project helps business users share information and their understanding of that information with team members to successfully deliver the project.

Collaborating daily with a technical team is important as well as collaborating throughout the entire project Community to become successful.

In the past, it was quite complicated to collaborate because the development team had to keep deadlines, quality, and budget in mind.

Stages of Agile Software Development Methodology

With the agile approach, developers are more focused on technology and data than on answering important questions.

Though you may find different versions of the stages, the underlying methodology and agile framework is the same.

Concept

In the concept stage, you start to develop a loose BI vision. The process begins with light documentation.

Here, you explain the initial architecture, consider the practical parts of delivering the project, and identify the prioritization between them.

Details are taken into consideration later so it is crucial to focus on the concept and develop from there.

Inception

In this stage, you begin implementing active stakeholder participation. Here is where you:

Identify key business requirements and needs including understanding the business questions that need to be answered through the bi system
Discover the available data sources
Train the project stakeholders in the fundamentals of agile
Determine bi funding and support
Understand the expected information delivery methods including dashboards, reports, ad hoc reporting and more
Prioritize key business requirements and needs with time and budget constraints in mind.It may help to Prioritize by writing user stories for each business question identified and then use a frequency versus difficulty quadrant to determine the most important ones.
Research and vet the online business intelligence software you will use.

Construction

In the construction phase, you deliver a working system that meets the evolving needs of stakeholders. You cycle through this stage to stage four at set increments, usually one to three weeks long.

After stages three and four done, you moved to production.

However, before production can begin, you have to develop the documentation, test drive your design, collaboratively develop reports, keep stakeholders actively involved, test the BI in a small group, and deploy software internally.

Release (Transition)

At this stage, you release your previous construction iteration into production. Then, return to the iterative phase and go back to transition again to release those changes to production.

At this point, you continue to involve key stakeholders, finalize documentation where it is necessary, finalize testing, release the working software pilot to a small subgroup, train your end users and production staff and then deploy it into production.

Production

Once you reach production, you’ve reached the final stage. Production is where you operate and support everything that has come out of the construction and transition stages and introduction.

At this point, you operate and support systems, reports, and dashboards. You identify enhancements and defects. When you make any of these changes, you must start at the construction stage and work them into production.

Though it may sound overwhelming, agile analytics and braces change, viewing it as not an obstacle that the competitive advantage.

This approach results in a more flexible and effective BI solution that is designed to continuously evolve for success.

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1. Use Planergy to manage purchasing and accounts payable

Read our case studies, client success stories, and testimonials.
Visit our “Solutions” page to see the areas of your business we can help improve to see if we’re a good fit for each other.
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3. Learn best practices for purchasing, finance, and more

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What Does A Procurement Analyst Do?

Keith Murphy — Thu, 24 Sep 2020 15:08:54 +0000

Download a free copy of "Indirect Spend Guide", to learn:

Where the best opportunities for savings are in indirect spend.
How to gain visibility and control of your indirect spend.
How to report and analyze indirect spend to identify savings opportunities.
How strategic sourcing, cost management, and cost avoidance strategies can be applied to indirect spend.

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What Does A Procurement Analyst Do?

Category

Spend Management

Written by Keith Murphy
9 min read

Tags

Procurement Spend Analysis

Last edited

April 18, 2024

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Procurement analysts spend time developing various approaches to procuring and contracting external support from the marketplace in line with current industry standards.

Part of this involves researching suppliers and gathering information from vendor databases, vetting potential candidates, and making a decision to award contracts.

After the contract is awarded, it involves keeping a close eye on performance and monitoring it throughout the contract term. The position may also be called a Purchasing Analyst or Purchasing Agent.

The job description will vary slightly depending on the industry, but you can expect it to be something like this, per ZipRecruiter:

“Our company is seeking a Procurement Analyst to assist with vendor management. In this role, you will focus on finding the best suppliers to support our business needs.

When we need to order materials from a vendor, you will issue a detailed purchase order outlining the price of the materials and the delivery timeline set in the contract. You will also conduct cost-benefit analyses to determine where we can improve, re-negotiating contracts with existing suppliers or negotiating contracts with new suppliers.

This role is essential to the efficiency and success of our organization, so all applicants must have a bachelor’s degree (preferably in business or supply chain management) or equivalent logistics experience, preferably in a role that utilizes SAP ERP software.“

Any business that has to purchase products or services from another company could benefit from having purchasing agents on the payroll.

Even small businesses often have someone in that role, whether they have that job title or not.

Procurement analysts job duties include:

Managing material requirements planning (MRP) and data maintenance best practices for buyers
Managing the work breakdown structure (WBS) and work authorization setup.
Managing inventory replenishment processes at the SKU level and address changes and issues that may arise
Manage suppliers’ key performance indicators (KPIs) to ensure targets are reached for cost, service, and quality levels across all operating centers.
Keeping a close eye on the market to identify trends and remain proactive.
Decision-making based on data analysis.
Helping manage multiple projects
Quoting purchase and manage shipping logistics for everything related to operations
Working with senior management on requests for proposals (RFP) and requests for quotations (RFQ) and providing detailed reports on vendor response
Receiving, reviewing, and revising bid and RFP documents and purchase orders to maintain department policy and regulation compliance
Reviewing and placing contracts and subcontracts

According to the United States Bureau of Labor Statistics, procurement analysts earn an average of $33.80 an hour, for a total of $70,301 in average salary. Between 2018 and 2028, the career is projected to grow 14%, faster than the national average job growth rate, and produce more than 118,000 job opportunities.

Procurement Analyst Skills

Procurement analysts must have command of word processing software and information management systems so that they can request, develop, approve, and track contracts and other related procurement documents.

Successful procurement analysts possess analytical skills, communication skills, and interpersonal skills.

These skills are necessary to build and maintain supplier relationships, streamline the procurement process, and analyze the data to find cost savings opportunities to help the organization save money.

It is crucial to be able to interpret a range of information to use it to create proposals. Analysts have to be able to communicate both clearly and concisely, with the spoken and written word.

Purchasing Analyst Education Requirements

While it’s possible to get into the procurement field with just a high school diploma or GED, the majority of procurement analyst positions, especially a senior procurement analyst position will require a Bachelor’s degree.

There isn’t a program in procurement, so most companies look for people who have a degree in business management, logistics, or supply chain management. A business administration degree is also an option.

Many procurement analyst jobs offer a certain amount of on-the-job training, but at the senior level, you should have years of experience in the field.

The good thing is there’s no set career path. You can start out with a business degree, a supply chain management degree, or even an accounting degree.

If you have experience as a purchasing manager, or in project management, you may find yourself in a great position to apply for a procurement analyst job. Related jobs include administrative assistant, operations manager, buyer, data analyst, financial analyst, and project engineer.

Junior Level vs. Senior Level Procurement Analyst

At the Junior level, you’re working the entry-level. These positions are ideal for people who have a year or less of experience in the field.

Senior-level positions are for those who have at least 5 years of experience. Procurement analyst salaries vary depending on the job type, with senior-level employees earning more.

For instance, the average entry-level procurement analyst in New York, New York could expect to earn an average of $63,154. That same position in Washington, D.C, earns an average of $83,083 per PayScale.

For the experienced, average late-career position in New York City, PayScale reports an average salary of $79,251. In Washington D.C., PayScale reports an average salary of $104,275.

Career Path for Procurement Analysts

If you start your career path as a procurement analyst, you can move into a position as a Senior Buyer, a Procurement Specialist, or Procurement Manager.

From a Senior Buyer, you could move to a Purchasing Manager or a Supply Chain Manager position. The procurement specialist can also lead to a Procurement Manager position.

Implementing purchase-to-pay process automation makes reporting easier, reduces error potential, and leaves room for procurement analysts to spend more time handling tasks such as negotiating cost savings with vendors.

Download PDF

What’s your goal today?

1. Use Planergy to manage purchasing and accounts payable

Read our case studies, client success stories, and testimonials.
Visit our “Solutions” page to see the areas of your business we can help improve to see if we’re a good fit for each other.
Learn about us, and our long history of helping companies just like yours.

2. Download our guide “Indirect Spend Guide”

3. Learn best practices for purchasing, finance, and more

Browse hundreds of articles, containing an amazing number of useful tools, techniques, and best practices. Many readers tell us they would have paid consultants for the advice in these articles.

The post What Does A Procurement Analyst Do? appeared first on Planergy Software.

Spend Analysis Example: How to Conduct A Spend Analysis

Lyle Del Vecchio — Fri, 03 Jul 2020 15:50:39 +0000

Download a free copy of "Indirect Spend Guide", to learn:

Where the best opportunities for savings are in indirect spend.
How to gain visibility and control of your indirect spend.
How to report and analyze indirect spend to identify savings opportunities.
How strategic sourcing, cost management, and cost avoidance strategies can be applied to indirect spend.

Download Free Copy

Spend Analysis Example: How to Conduct A Spend Analysis

Category

Spend Management

Written by Lyle Del Vecchio
16 min read

Tags

Examples Spend Analysis

Last edited

March 21, 2024

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For your organization to be at its best, every stakeholder needs to know what’s being spent by whom—and what kind of return you’re getting on your investment for each dollar spent.

Performing regular and thorough spend analysis, powered by accurate and complete data and best practices, can help you understand where your money’s going, as well as reveal actionable insights you can turn into opportunities to optimize your workflows for greater productivity and profits.

Carefully reviewing a spend analysis example, using the right software, and following a set of basic processes will enable you to gain insight into, and control over, your own spend while simultaneously improving strategic sourcing, business process management, and overall organizational health.

What is Spend Analysis?

Collecting detailed information for all your company’s transactions and using data management tools called spend analytics, you can gain not only a complete picture of your company’s overall spend structure, but use the insights you glean from examining it to make meaningful and effective changes that generate additional savings and value.

This data might include a variety of sources.

During spend analysis, all of this data is collected, organized, cleaned, and then finally analyzed to obtain whatever data supports the current objective.

Spend analysis has a wide variety of applications, and can be used to improve internal processes across business units, take advantage of savings opportunities, and engage in more strategic sourcing throughout the company’s entire supply chain, just to name a few examples.

Companies who have embraced digital transformation will use spend analysis software, either as a standalone application or, more commonly, as part of a comprehensive eProcurement solution such as Planergy.

This system may be your primary financial data management application, or connected to other software systems such as your office suite, accounting software, and enterprise resource planning (ERP) applications.

By centralizing data management and eliminating time consuming and outdated methods of data analysis, modern procurement spend analysis gives you the big picture and the “nitty-gritty” of both direct and indirect spend, all while helping you identify patterns and problems you can leverage or correct, respectively, to help your business thrive.

Because it requires clean and complete data to ensure accurate insights, spend analysis gives procurement teams an opportunity not just to analyze the data they have, but to create an environment where data management and spend management are mutually supported.

Benefits of Spend Analysis

Your company’s specific goals for spend analysis, and the spend analysis process itself, will likely be different than those used by your competitors. But regardless of your goals, spend analysis has some definite benefits when done properly, including:

Greater Spend Data Visibility.

Because it requires clean and complete data to ensure accurate insights, spend analysis gives procurement teams an opportunity not just to analyze the data they have, but to create an environment where data management and spend management are mutually supported.

Through process optimization and internal controls, regular spend analysis helps ensure all spend data—both for direct spend like raw materials and essential equipment and indirect spend on office supplies, marketing, etc.—is captured, organized, and secured in the cloud.

Management has real-time access to data they can trust when creating spend and cash flow forecasts, setting budgets, refining spend categories, or engaging in supplier relationship management to take advantage of savings opportunities and strategic partnerships.

Total visibility also helps banish maverick spend and insulates your organization against invoice fraud.

Capturing More Savings—and Building More Value

Procurement has long been tasked with locating cost savings wherever possible. But with the availability of more sophisticated data analysis tools and process enhancements like automation, data can be manipulated more deftly.

Spend analysis helps procurement teams identify areas where savings can be captured:

Improving internal processes (e.g., lowering cycle times for purchase orders and invoices)
Replacing or rehabilitating underperforming vendors
Pursuing savings opportunities by leveraging economies of scale, special limited-time terms, and adjusting spend forecasts and budgets to compensate for problems expected (e.g., seasonality, changes in industry or governmental policy) and unexpected (supply chain disruption due to global pandemic, natural disaster, etc.)

But spend analysis is about much more than cost reductions. It also helps procurement professionals create and preserve value.

Less tangible assets like public goodwill and reputation (along with absolutely tangible benefits such as additional sales and referrals) can be obtained and preserved by partnering with diverse suppliers who support your company’s efforts to be a responsible corporate citizen.

In addition, spend analytics can reveal opportunities to refine your sourcing for quality, performance, and reliability, building a strategic sourcing strategy that cuts costs and builds value by lowering total cost of ownership (TCO) across spend categories and down to the item level.

Spend Analysis Example—Seven Steps to Success

Companies of all sizes and types can achieve effective and accurate spend analysis, regardless of their objective, by following a series of simple processes based on spend cube analysis:

Identify Your Objective. Spend analysis is not a one-size fits all affair. It works best when you have a specific goal in mind, especially if you’re looking for patterns within the data to support (for example) process improvement.Some potential objectives might include:
- Cutting costs in specific categories, departments, etc.
- Eliminating maverick spend and invoice fraud.
- Reducing risk through supply chain and supplier management.
- Improving the accuracy and completeness of your spend forecasts
- Procurement process improvement, e.g. optimizing invoice approval cycle times or identifying and eliminating bottlenecks in the purchase order creation process.
Identify Spend Data Sources. This includes all sources of spend data, from across all business units, departments, and teams. Data sets will likely include:
- Accounts payable invoices
- Spend data from your eProcurement solution
- The general ledger
- Pcard and credit card transactions
- Enterprise Resource Planning (ERP) software
- Any remaining manual Excel spreadsheets or other documents not already incorporated into your eProcurement system
Collect and Consolidate Data. If you don’t already have a centralized, cloud-based procurement solution in place, ensure you’ve developed processes either to transfer all information into a common format, or allow all your data sources to “talk” to one another to avoid errors, inconsistencies, duplicates, and other potentially disastrous data errors.
Clean Your Data. Useful insights are born from complete and accurate data sets. Once you’ve collected all your data, review it for transaction, category, and item-level errors, and then correct them. Standardize your clean data for easy analysis and viewing.
Link Suppliers and Categorize Spend. This is especially important if you’re looking for insights related to supplier management, but grouping suppliers together based on purchase data, payment terms, frequency of purchase, spend category, etc. is essential to reliable top-level analysis.
Use a standardized categorization system, such as the United Nations Standard Products and Services Code (UNSPSC), to organize and track all your direct and indirect spend.
Perform Spend Analysis. With all your data in place, you can use your software tools to “slice and dice” it in support of your objectives from Step 1. For example, if your objective was to streamline your supply chain, you could look at how much of your spend is dedicated to underperforming or non-strategic suppliers and adjust your supply chain to move some of that spend to preferred suppliers who offer better terms, greater reliability, or less risk.
To provide another example, if your goal was to improve your overall contract management through both process improvements and more efficient spend, you could review all contracts, identify those with pending renewals, and then:
- Identify non-strategic redundancies (i.e., redundancies that are incidental, rather than designed to provide contextual support for business continuity in the event of a crisis)
- Identify contracts with strong potential for renegotiation based on vendor performance, compliance, or your own investment and innovation plans for the coming financial period.
- Assign teams familiar with these vendors to work with legal and revisit these contracts to remove unnecessary dead weight from the supply chain, renegotiate from a stronger position backed by data, or engage in supplier relationship management to craft new contract terms for shared initiatives.
To give a final example, if your analysis identifies areas of excess risk created by single source suppliers of crucial materials whose shipments have to travel a considerable distance, you could research local vendors and pursue contingency contracts with them to better insulate your supply chain and protect business continuity.
Rinse, Reassess, and Repeat. Your spend data doesn’t stand still, and neither should your analysis. Use the insights revealed by spend analytics to pursue your goals, and be ready to repeat the process regularly as your data grows and you identify new objectives to pursue.

Not All Spend Management Platforms Are Created Equal

When you’re choosing a procurement solution, remember that spend analysis is only as useful as the accuracy and completeness of the data sets feeding it. Make sure you choose a solution that gives you:

Complete, centralized, and cloud-based data storage and management, accessible from both desktop and mobile platforms. Capturing not just spend data, but all related data (including detailed information related to supplier performance and compliance, market trends, social media and consumer trends, regulatory concerns, and global economic events) ensures the best possible data goes in, for the best possible results coming out.
The end result is better budgets, more accurate forecasts, reports, and audits, greater agility with more control over cash flow, and, ultimately, greater competitive strength, innovation, and profitability across all business units.
Digital tools like process automation (powered by machine learning) in conjunction with powerful spend analysis tools. Eliminating time-consuming manual processes improves accuracy and speed, and supports real-time access to the very latest data for analysis, forecasting, and decision making.
Plus, it frees your team to focus on strategic tasks like supplier relationship building, contract management, and crafting a sourcing strategy and supply chain that are agile, resilient, and helpful in shifting procurement away from being a mere cost center and toward its new role as a powerful value creation engine for your entire business.

Analyze Your Spend for Strategic Sourcing and Smart Decision-Making

Do you know where your money’s going? Are you building value while you’re cutting costs?

Spend analysis makes it possible to know the answers to these questions in real time so you can make smarter, more strategic spending decisions that will help your company perform and grow.

Invest in the right spend analysis tools and follow best practices, and you’ll be able to transform your spend data into actionable insights, a healthier bottom line, and an agile, resilient organization that makes the most of every dollar it spends.

Download PDF

What’s your goal today?

1. Use Planergy to manage purchasing and accounts payable

Read our case studies, client success stories, and testimonials.
Visit our “Solutions” page to see the areas of your business we can help improve to see if we’re a good fit for each other.
Learn about us, and our long history of helping companies just like yours.

2. Download our guide “Indirect Spend Guide”

3. Learn best practices for purchasing, finance, and more

Browse hundreds of articles, containing an amazing number of useful tools, techniques, and best practices. Many readers tell us they would have paid consultants for the advice in these articles.

The post Spend Analysis Example: How to Conduct A Spend Analysis appeared first on Planergy Software.

Spend Analysis Archives : Planergy Software

Tail Spend Analysis: What Is It, How To Perform It, and the Benefits

What's Planergy?

Cristian Maradiaga

King Ocean

Download a free copy of "Indirect Spend Guide", to learn:

Tail Spend Analysis: What Is It, How To Perform It, and the Benefits

IN THIS ARTICLE

Introduction To Tail Spend Analysis

Defining Tail Spend

Benefits of Tail Spend Analysis

Tail Spend Analysis Best Practices

Establishing Tail Spend Analysis Metrics

Developing a Tail Spend Analysis Plan

Analyzing Data and Identifying Trends

Identify Your Supplier Base

Segmenting “Major” Spend from “Tail Spend”

Reducing the Number of Suppliers in the Tail-End

Leveraging Tail Spend Analysis To Improve Efficiency

How To Automate Tail Spend Analysis

What’s your goal today?

1. Use Planergy to manage purchasing and accounts payable

2. Download our “Indirect Spend Guide”

3. Learn best practices for purchasing, finance, and more

Related Posts

Pareto Analysis in Procurement: How To Use Spend Analysis To Cut Costs

What's Planergy?

Cristian Maradiaga

King Ocean

Download a free copy of "Indirect Spend Guide", to learn:

Pareto Analysis in Procurement: How To Use Spend Analysis To Cut Costs

IN THIS ARTICLE

Pareto Principle vs. Pareto Analysis

What is Pareto Analysis?

How Pareto Analysis Works?

The Benefits of Conducting a Pareto Analysis

How to Conduct Your Own Analysis?

Practical Applications of Pareto Analysis

Negotiate Prices with Suppliers

Consolidate Suppliers

Utilize Automation

Leverage Data Analytics

Tips for Conducting a Successful Analysis

Set Clear Objectives

Make Use of Data Visualization Tools

Test Your Results

How Pareto Analysis Helps Your Procurement Strategy?

What’s your goal today?

1. Use Planergy to manage purchasing and accounts payable

2. Download our “Indirect Spend Guide”

3. Learn best practices for purchasing, finance, and more

Related Posts

Predictive Analytics in Procurement For Actionable Insights

What's Planergy?

Cristian Maradiaga

King Ocean

Download a free copy of "Indirect Spend Guide", to learn:

Predictive Analytics in Procurement For Actionable Insights

What is Predictive Analytics?

How Predictive Analytics Helps Procurement

Improve Your Spend Analytics Process

Demand Forecasting Optimization

Improve Your Supplier Management

How Your Company Can Make the Switch to Predictive Procurement

People

Process

Predict

Prioritize

Produce

What’s your goal today?

1. Use Planergy to manage purchasing and accounts payable

2. Download our guide “Indirect Spend Guide”

3. Learn best practices for purchasing, finance, and more

Related Posts

How To Create Savings With Better Spend Management In Procurement

What's Planergy?

Cristian Maradiaga

King Ocean

Download a free copy of "Indirect Spend Guide", to learn:

How To Create Savings With Better Spend Management In Procurement