Why spend analytics delivers more than cost reduction

It may seem a little 'Ebenezerish' to emphasise the importance of spend analytics during the…...

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It may seem a little ‘Ebenezerish’ to emphasise the importance of spend analytics during the season of goodwill, but the benefits extend beyond cost reduction, a spend analysis expert has explained. In an interview for the online news source for procurement professionals, Strategic Sourceror, Brian Seipel, a master of spend analytics, divides organisations into two groups – those that have understood the value of sound spend analytics and devised clear processes for conducting it, and those that haven’t and don’t consider spend analysis at all.

While the festive season always results in intensified workloads for purchasers as they embark on the procurement of Christmas (buying Christmas items), it may seem counterintuitive to add to their workloads with spend analysis. Other duties, such as category management, marketing procurement, and especially supply relationship management, take on added significance now. Seipel concedes that procurement is a tough job at any time of year. “Let’s face it,” he says, “you and your team have your collective hands full keeping the Procurement trains running each day.” Adding spend analytics to the workload may seem like the final straw on the camel’s back.

Cleansing and classifying spend data can be time-consuming. But, for Seipel, the advantages outweigh the disadvantages and go beyond cost reduction. Taking a thorough look at historical purchasing often exposes previously unseen opportunities for supplier consolidation. A new strategic sourcing roadmap can emerge from the mass of data in which it was buried. The result isn’t simply cost reduction but often more efficient processes and a more efficiently, easily-managed supply base. And procurement teams can use spend analytics to pinpoint the sources of off-contract purchases so that the issue can be tackled before it becomes a runaway train.

The software is expensive, but a good procurement as a service company can lift that burden off the shoulders of a business in exchange for a comparatively modest fee.

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