In one of the research, 53 percent of CPOs acknowledged that data visibility and analytical capabilities are still needed for establishing the next level of performance. The current pandemic has proven that procurement functions can deliver at speed. However, how can they also ensure that they are spending wisely? In this context, Spend Analytics becomes an important task to be carried out.
What is Spend Analytics?
Spend analytics is a process of gathering procurement data and organizing it so that it can be visualized and analyzed. Spend analysis deep dives into procurement and expense data to analyze and understand the spending patterns of any business. It helps organizations understand their supply base, track the metrics of procurement performance, and creates actionable insights for vendor consolidation to decrease procurement costs. Often the terms are used together because procurement teams review the analytics to complete their cost analysis.
Actions taken under Spend Analytics?
Spend analytics helps optimize the procurement performance of any organization by integrating information from spend data sources, cleaning it for accuracy, and categorizing it deeply. The business, operational managers, and procurement professionals are able to make better, actionable decisions for their organization using spend analysis software with reliable data with deep classifications. Cost savings are organizations’ main goals in this process. Most organizations are increasing time spent analyzing the process of expense management to better understand their spending patterns and identify opportunities to save in the future.
Importance of Spend Analytics
Analytics is important so that organizations can identify and prioritize budget-saving opportunities now at the same time make better decisions in the future. It provides absolute visibility into an organization’s procurement process, offering useful insights on expenditures. It can help improve the supply management process to consolidate spending or ensure compliance of any business or supplier.
Spend analytics improves the following:
- Increases procurement teams’ visibility on spending and suppliers.
- Eases strategic sourcing.
- Mitigates risk management.
- Removes obstacles facing business units
- Nurtures and manages effective supplier relationships.
- Provides better oversight of supply chain processes.
There are three core areas to consider.
- What is the total spending of an organization?
- With whom is the organization spending money?
- Is the organization getting what has been promised for the purchase?
Spend analytics, in general, is viewed as a part of the large domain, which helps an organization to understand and identify the above-mentioned factors for the betterment of the organization.
Implementation of the Spend Analytics
To successfully execute the spend analytics process you need to consider the following steps.
- Retrieve spend data.
- Verify data accuracy – Clean data.
- Deeply classify the data.
- Use an analytics solution that provides good visibility and instant insights.
- Collaborate with other related departments within your organization to identify potential savings.
To benefit more from spend analysis; you have to spend more time sorting data to identify the flaws in the records. Using an AI-driven platform, cleaning and categorization time can decrease while data accuracy increases.