Using Advanced Spend Data To Identify Untouched Spend Management Opportunities
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Using advanced spend data to identify untouched cost management opportunities will have a direct impact to a business's bottom line. Advanced spend data analysis will help companies to both reduce cost and to improve the performance of their operation. Spend management is not a one-time initiative; instead, it is an ongoing organizational process.
Using spend data will help companies to ensure that suppliers are providing accurate pricing, volume discounts and rebates. If flaws are found, then accurate spend data will help companies to leverage their information to receive better prices and services from suppliers. Spend data will also help companies to evaluate and compare contractor performance. Informed sourcing could save companies up to 12 percent in materials costs.
Companies will also improve cost management by using all available inventory. When all inventory is used appropriately, companies directly lower their cost of goods sold. In fact, companies may reduce their inventory by between 20 and 70 percent with a 5 to 50 percent reduction in total inventory costs.
To start effective spend management analysis, companies should identify their goals and objectives. Asking certain questions about the importance of procurement and travel data and the purpose of data analysis will help departments to develop more focused objectives. Departments will also want to identify the stakeholders for procurement and travel data and to identify ways that data analysis creates value for the organization.
Then, procurement departments will need to obtain data from all sources, utilizing familiar tools. Expense reporting tools, accounts payable data and corporate card data will be among the useful sources for spend information. Corporate credit card companies, for instance, may be able to provide alerts for spending that happens outside of purchasing policies.
Next, companies will have to ensure that data collection is accurate and complete. Company-wide methodology for naming parts and suppliers will ensure uniform data collection across multiple departments. Finally, companies will have to analyze their spend data. Analysis will provide information about suppliers, transactions and pricing as well as providing an overall view of the inventory and turnover cycle.
Reports to managers must be made monthly, quarterly or annually, depending on what is most suitable. When reporting, procurement departments should use hard figures such as unit costs, percentages of sales and revenue and cost per transaction to give managers a clear picture of the value added by using advanced spending data to identify untouched cost management opportunities.