The spend analysis dilemma

The spend analysis dilemma

How do you report on supplier spend when your data is all over the place?

We recently conducted some research, asking 200 senior business management and procurement professionals about the pain points their department has experienced as their organisation has grown. Based on our findings, we’ve created a series of six diary extracts from a fictional overworked procurement manager, each one reflecting the common pain points identified from the real-world study.

One of the issues highlighted was the ability to complete the task of responding to due diligence request from potential investors looking for a full picture on spend.

 

We all know that the business as usual priorities within procurement, whether it’s identifying cost savings, managing spend control, or improving spend compliance can be turned on their head with dreaded last minute requests ‘from above’. A quick turnaround to provide hard-to-find answers can leave even the most capable procurement professional in a spin.

Procurement teams are expected to ‘know it all’ when it comes to understanding business spend, even when there are lots of factors beyond their control – from poor spend control processes to de-centralised buying, for example. Taking our poor ‘overworked procurement manager’ in the diary extract above, when her team was requested to provide a group-wide supplier spend breakdown for an outside investor looking to provide a potential cash injection. To complete the task she’ll need to gather numerous reports from across the organisation, all likely to be in varying formats, with different or overlapping spend categories originating from different systems, and most probably in different languages too.

And then comes the hardest part – making sense out of all this information. There could be hundreds or even thousands of spend category classifications and naming conventions that need aggregating into something digestible. And with a timescale of days rather than weeks, just how is our poor procurement manager going to achieve this when their data is quite literally all over the place?

This problem applies to many procurement teams. According to our research, 74% of procurement professionals admit that their procurement teams are not prepared to support spend analysis requests such as investor due diligence.

Technology can be the answer to this dilemma. Analytics software, such as web3 Spend Analysis, can help procurement professionals to understand information that is often incomplete, incorrect, difficult to aggregate, or classified at such a high level that it is practically meaningless. Once all the data is brought together, users can visualise all the relevant and timely information through the interactive dashboards, from the overview on all spend data down to a single transaction detail.

Of course, the benefits of Spend Analysis are not limited to pre-investment assessments. After completing a full spend analysis exercise, procurement professionals can look into ways to negotiate pricing, improve processes, or capitalise on savings opportunities to push their supply base for better deals – which can only be achieved by having the tools in place to get a clear understanding of spend.

Since 2001, Wax Digital have been helping organisations to facilitate best practice and achieve savings across all their spend. Feel free to contact us about your next project and we’ll see how we can work together to achieve your business goals.