The concept of Spend Analysis (Spending Analysis) could be quite ethereal for many who are immersed in the world of procurement and difficult to materialize in a tangible exercise that really allows to have a valuable input for decision making.
Within an organization, in the supply area, and as a good practice, it is should allocate resources to execute this work on a regular basis, so that it creates a discipline in the team to make the information available and visible to buyers.
This type of exercise creates culture and awareness in the purchasing team so that decisions are made based on real and analyzable data. This behavior must permeate in order to convert the analysis of the expense into the conformation of the control tower.
How to implement Spend Analysis?
Aggregation of demand and future needs
The best of all worlds is when you have a centralized purchasing area and the needs of a certain category are channeled to a single category manager, so that, regardless of the requester, the buyer can visualize the total demand of the company.
However, this is not always implemented and work is done on resource availability by purchasing in multiple categories, in this case the recommendation is to is to hold daily meetings (dailys) where the requests to be attended during the day by each buyer are socialized.. This allows for visibility and redirection of responsibilities, and for incredible input from buyers of specific expertise.
Normally, future needs are difficult to obtain due to the lack of judicious purchase planning exercises. have at hand purchase histories for equal periods of time and present it to the requesting area for the respective validation. This information will generate an important input in the conversations with suppliers and will increase the negotiation power.
Historical graphs of related variables
Having historical data on purchases over long periods of time will allow us to understand phenomena such as seasonality and market behavior, etc. It is very important to separate unit prices from quantities in order to see issues such as economies of scale, it is also relevant to have external variables plotted when a certain dependency relationship is perceived, such as the exchange rate, the price of the dominant supplier's shares, international oil prices or others. commodities, inflation, minimum wage, are data that are normally public and are tabulated and can be easily plotted and allow a visibility of correlation between variables.
A highly recommended practice is to publish a summary of relevant information in a dashboard that is easy for the team to see and understand.Having an exposed screen connected to graphics generates a lot of curiosity and prompts suggestions for information that the team would like to have constantly available to help them make decisions.
Link classifications
To be able to classify data and relate different sources is a challenge and, normally, it is necessary to start with existing classification parameters such as the activities of each company, in the absence of such classifications, start with standard classifications such as UNSPSC, UNICLASS or those closest to the company's sector of operation.. This will allow to have more global information results going from the general to the particular.
Another way to materialize the exercise of Spend Analysis is through the Category Management (Category Managers) who normally in their comparative tables handle a lot of information, such as the historical purchase prices of each item, the hidden costs of each offer, the different considerations of the bidders in terms of purchase history, among others. The best way to take advantage of this knowledge is to have a new buyer in this category either by structured knowledge transfer plans or simply by absences of the Category Manager, they really become less difficult to execute purchases since they have all the information available for decision making.
