For long, we have wondered how to harness spend for analytics that can improve business performance. Now Spend Analysis is the answer with procurement evolving every day. It is because of such technological evolution; procurement could transform its image from being a transaction to more strategic. The transformation not only helped the delivery of value to the bottom line but to all necessary processes.
70% of organizations across the globe have seen an increase in spend visibility as a direct result of the spend analysis function and its associated processes. Aberdeen Group 2010
A typical procurement organization is involved in the sourcing of a lot of materials through direct & indirect purchases. As the organization grows and spreads, its purchases and the number of suppliers also increase. With an increase in the volume of investments, it becomes difficult to monitor every purchase happening within an organization. In this case, purchase data is also spread across the organization in different terminologies and legacy systems across business units with no connectivity. Because of such complication, organizations fail to access data to analyze spend.
The first step for companies to increase visibility into their spend is to establish a standard nomenclature for direct & indirect purchases. After that, data classification should be granular to aid the analytics tool to read the spend data and provide what-if analysis and savings opportunities.
For data cleansing, an automated classification tool is a solution. Through automated classification, an organization can sort data that is multi-lingual, contains misspelled words, cryptic data, and even abbreviations. Adopting a uniform code like UNSPSC can be a perfect start to making your data actionable. Organizations can choose from various taxonomy schemas available (UNSPSC, eClass, etc.) based on their business/industry requirements. Organizations can also look towards customized taxonomy based on their unique business needs.
Clean, Unduplicated and Classified Data Helps
- Extract spend data from multiple internal systems
- Cleanse & Classify spend data
- Enrich, Analyze & Report spend data
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- Blog -Procurement Benchmarking: Analyzing the Cost of Procurement as a Percentage of Spend
- The Need for Government Procurement Transformation in ANZ
- Spend Analysis Software
- White Paper – The Evolution of Spend Analysis and the Rise of Big Data
- White Paper – Spend Analysis: Making sense of Data