Most CPOs focus on reducing costs, and it is a major business priority for them. A cost-effective procurement system allows companies to save millions annually, but before cutting costs, companies should perform comprehensive spend analysis. It will let them see where they are spending money and which areas can be cut without affecting productivity.
Here are some reasons why you should focus on spend analysis and make it an integral part of your procurement processes:
A clearer picture of suppliers and expenses
Analysing spend allows procurement to understand where and how the company is spending money. It also provides vital information about whether suppliers stand up to the company’s expectations. With this information, procurement can ensure superior supplier relationship and category management.
Improve procurement processes
The information gleaned from spend analysis allows procurement to improve internal and external processes. For example, organisations can implement e-procurement systems or get individual suppliers to consolidate their invoices. Analysing spend can assist procurement to ensure a greater return on investment.
Manage and mitigate risks
Procurement needs an effective supplier relationship management strategy. But when you work with the same supplier for a long period, the strategy may be neglected, putting your organisation at risk. By using the spend data, you can analyse suppliers and determine supply chain risks so that your organisation does not have to contend with loss of productivity due to supplier-related risks.
Leaner procurement functions
Analysing spend data also gives insights into procurement activities and expenses. As a result, you are better positioned to see which processes can be improved to reduce costs. This will help you to reduce the costs of procuring goods and services that the organisation needs.
If you have not yet considered spend analysis, there is no better time to begin. It will help improve procurement function and also reduce procurement costs.