As corporate procurement organizations are charged with securing products and services of the best quality and the lowest possible cost, their enterprises are counting on them to be much more than just “order takers.” To accomplish that, procurement organizations must develop capabilities in spend intelligence. This takes spend analysis a step further, allowing the enterprise to take what it knows from the spend data it has gathered and use it to act on forward-thinking initiatives. In other words, spend intelligence provides actionable information.
Spend intelligence helps an organization’s efforts to bring more spend under management, a key strategy for chief procurement officers highlighted in the March 2005 Aberdeen report: The CPO’s Agenda: Five Strategies for Procurement Transformation. The
report stated that the success of any supply management program depends largely on its ability to access, organize, and analyze spend data. This access offers invaluable intelligence on spending patterns, compliance and performance ratings, inventory status, and part attributes. This, in turn, helps identify savings opportunities, drive compliance, and develop sourcing strategies. This entire process of determining, defining, and executing souring strategies is called spend-under management. Various Aberdeen studies have revealed that enterprises with more spend under management achieve cost and non-cost
objectives, such as quality and other metrics.
To gauge how far enterprises have advanced in spend intelligence practices, Aberdeen undertook a benchmark survey of nearly 140 organizations.
Key Business Value Findings |
- Best in Class companies excel in spend intelligence through more automation, more frequent spend analysis, and above average spend visibility.
- The key to effective spend intelligence is not just automatically classifying spend information, but performing this crucial process quickly and accurately.
- The top challenges to spend intelligence efforts lie in data quality, data cleansing, and data classification.
- While enterprises’ most critical criteria in selecting spend intelligence tools focus heavily on processes, the top criterion addresses user friendliness; enterprises want reporting and analytics tools that are easy to use.
- Enterprises are leaning ─ slightly ─ toward spend intelligence software providers’ tools over the offerings of ERP-based solutions and those of e-sourcing and eprocurement vendors.
- Adoption of spend intelligence automation is still in the early phase; 53% of respondents say their enterprises’ spend intelligence programs generally revolve around in-house manual services, using spreadsheets.
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