Benefits of Automated Spend Analysis
What does the future of your business look like? While many business owners predict steady growth for years to come, courtesy of markets filled with opportunity, streamlined processes for improved efficiency and cost savings, and a staff that’s ready for anything, the truth is, no one knows what’s ahead.
No matter the industry, all businesses are up against many potential outcomes that could change at any given time. From new competitors entering the market to changes in consumer behavior, there’s no clear path for anyone.
Even though that seems bleak, there are things businesses can do to improve their chance at consistent growth. Thanks to big data analytics, intelligent planning, and taking a proactive approach to all things business, businesses can take control even in the face of uncertainty.
For procurement leaders, everything comes down to how to purchase what the company needs at the best prices to increase cost savings. Company executives want to know the company is earning a solid return on investment, while the staff wants to make sure they have everything they need to do their job properly.
The most obvious benefit to automated spend analysis is the improved insight into spend.
Though the initial work required to attain spend visibility often requires a great deal of time and resources, once it’s complete, it’s much easier to see cost savings opportunities.
Organizations are able to identify the procurement spend patterns, including categories where too much money is spent and make adjustments toward more strategic sourcing.
Aside from finding the best prices and deals from your suppliers, improving your spend visibility also helps in planning and maintaining the optimal inventory level.
By placing orders at the right time, your organization can lock in low prices during periods of little to no demand, rather than paying higher prices because suppliers are dealing with increased demand.
Better Spend Forecasting
Forecasting spend comes with a set of its own benefits for many teams across an organization. The finance and planning departments can use the data to forecast future spending, which can be used to plan for the next few months, or even years, based on recurring vendor spend.
Sourcing teams can use the information to work with department heads to help them forecast spend for their most important categories and vendors.
Improved Supplier Performance Management
Organizations can gain insight into supplier performance to encourage stronger supplier relationships and proactive development. With automated spend analysis, companies can generate a list of non-performing suppliers with ease. Using this information, they can improve contract compliance with continuous price monitoring.
Supplier scorecards assist in evaluating suppliers and vendors because they capture performance metrics.
Comprehensive spend analysis provides additional information about how much money your organization spends with each supplier on various goods and services, and which suppliers get the most of your business.
Having this spend data readily available and easily accessible is particularly helpful in contract negotiations because it allows organizations to maximize their procurement budget.
When implemented well, companies can collaborate with fewer suppliers for a greater value, establishing a leaner and more efficient procurement process.
Spend analytics benefits both buyer and supplier. When it’s time to negotiate a contract, both parties can focus on their respective strategic goals without getting caught up in the fight for small wins.
Risk and Maverick Spending Management
Maverick spending comes into play when employees opt to go outside of the approved suppliers to purchase goods and services. When this happens, it affects profits and contract compliance and fulfillment.
Identifying maverick spend is essential, and the only way to do this is to have increased spend visibility. Organizations must be able to identify any and all unmanaged costs, which requires a detailed spend analysis including tail spend analysis. Accountability helps in tracking mistakes to a particular person or source, to address the issue at the root cause.
Procurement organizations often use spend analysis as the first step of aligning the sourcing strategy with competitive strategy. When done properly, organizations can identify opportunities to leverage buying power to reduce costs, improve operational performance and supplier management, and also improve relationships with all stakeholders both internal and external.
Most of today’s spend analysis technology allows for ERP cloud-native setups with real-time spend reporting to make for a simple spend analysis process. The analytics tools make for easier data management and improved spend management.
As procurement transformation continues to make it more complex for many industries, it’s no longer feasible to rely on spreadsheets and accounting analysis tools to handle procurement and cost management. Procurement teams that aren’t making use of automated procurement systems at each stage of the supply chain are falling behind and making things harder on themselves.
Regardless of industry, from healthcare to food and beverage, companies have to procure goods and services from others to maintain smooth operations – from the raw materials and supplies required to manufacture a product, to the run of the mill office and breakroom supplies to keep the employees happy and healthy at work.
Using advanced analytics and artificial intelligence powered platforms like what Planergy provides, allows for a better understanding of where the money is going and for better planning in the future.
Procurement is only going to get more complicated from here, and the best organizations are those that understand where every dollar is spent while also planning their purchases based on timing, need, and pricing. Automated spend analysis gives procurement teams the tools they need to ensure they’re always heading in the right direction.