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Spend Analysis Mistakes that can mar your Sourcing Strategy

Over the year procurement has transformed from a tactical purchasing function to a high priority strategic partner to its organizations and this is due to the immense contribution of spend visibility rendered by an efficient spend analysis software. Spend Analysis is a method by which the overall spend of an organization is analyzed to look for opportunities for cost reduction.

If spend analysis is done properly it can act as a stepping stone for successful cost reduction and contribute savings to the business. But if spend analysis is done improperly it can mar your sourcing strategies by providing your inaccurate date and ultimately leading you to missed cost opportunities.

Thus, avoid spoiling your sourcing strategy by avoiding the spend analysis mistakes given below:

  • Do not overlook low-spend suppliers

For accurate spend analysis to enable negotiations, consolidation of spend is vital. Offering a supplier greater volume of order in exchange for more competitive rates is a win-win for both the parties. However, if we tend to miss low-spend supplier we fail to capture the future consolidation opportunity for these suppliers.


  • Consider Niche players during supplier categorization

Supplier categorization done at procurement discretion solely can be misleading sometimes. Thus, it is essential to share the categorization list with internal stakeholders to understand if there is a case where two seemingly same suppliers are being utilized and being categorized separately rather than being consolidated in a single category.


  • Obtain accurate supplier visibility

Companies that go into such relationships blindly may find their procurement strategies are misaligned with business goals, slashing profits rather than boosting them. Thus, having a clear understanding of supplier practices is essential in evaluating the risks and possible sources of disruption that are inherent in sourcing partnerships.


If you’re interested in knowing more about a spend analysis solution, talk to our solution consultant by dropping in your demo request at: www.zycus.com

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