How to Be the “Best in Your Business” Through Spend Analysis and Strategic Sourcing
“You don’t know what you don’t know.” It’s an old adage, yet so many of us in procurement and sourcing don’t stop to ask the question and investigate – where are we spending our money?
As Ardent Partners’ The State of Strategic Sourcing 2015 report states: “The vast majority of sourcing professionals know that having a clear and detailed view into a category of spend makes sourcing that category significantly easier and positively impacts results. Despite this, the current adoption rates of automated spend analysis solutions hover around 37%, with another 39% of respondents indicating plans to deploy the solution in the next two years. Such low numbers account for relatively poor levels of visibility and the large performance gap between Best-in-Class sourcing organizations that are more likely to have spend visibility and the others in the market who do not.”
While there is always a goal to be “Best-in-Class,” this distinction isn’t always feasible for companies without the manpower to manage it. However, any organization can be the “Best in Your Business,” and it starts with spend analysis. Implementing a spend analysis solution provides organizations with insight into their past and current spend. This will help identify trends and maverick spend, areas that need additional budget and even ensures external vendor consistency and compliance.
Spend analysis software such as Spend Analytics can improve your business model and increase company-wide efficiency, elevating an organization to be the “Best in Your Business.”
Spend analysis provides the data that supports:
- Increased cost savings
- Improved compliance
- Significant insight into suppliers
- High-quality price analysis and trends
- Cost avoidance
- Process improvement
- Consistent terms and conditions
- Increased internal and external customer satisfaction
Using spend analysis data doesn’t have to stop once you answer the question: “where are we spending our money?” The spend data can be used throughout the entire business process. From setting more accurate budgets at the start of projects and highlighting where you can leverage savings, to ensuring terms and conditions match with original agreements and a final financial data analysis at the conclusion of projects, spend analysis can support the entire project lifecycle.
Once you have your data, share the information. It is important to get the word out throughout the organization in order to affect the entire business. Start by spreading the good news within your department and then expand throughout the company. Highlight examples of success and demonstrate how spend analysis can apply to other departments. Find a champion in each department to help show the value of making these changes and how they can help move the needle within the entire organization.
Even if you don’t reach “Best-in-Class” status, you can always be “Best in Your Business.”
From computers and software to basic office supplies or widgets, organizations have a wide array of goods and services they need to purchase to support their business. While procurement professionals make it easier for users to purchase these items, sourcing’s job is more than just getting the best price and then buying “stuff.” It’s an entire process: one that can save you money, improve company efficiency and support you and your team in becoming the “Best in Your Business”.
Spend analysis and eSourcing go hand in hand, with some even saying spend analysis is the heartbeat of sourcing. By identifying where you and your company is spending money, you can develop a sourcing strategy, set budgets that are more accurate and have data to support the overall corporate spend.
Pairing spend analysis with eSourcing allows you to:
- Better identify what you should be sourcing
- Leverage spend and negotiate the best prices
- Work with suppliers to not only determine the best scenarios, but best terms and conditions for your company
- Track contracts to ensure terms and conditions are met
- Determine if the suppliers you contracted with in the past are still up to the task
- Help identify the best partners for your business
- Manage risk by tracking market volatility, supply chains and even where items are sourced
- Manage auctions and RFPs
As Ardent Partners’ The State of Strategic Sourcing Report states: “eSourcing applications automate the supplier negotiation process and are among the most powerful supply management solutions available today. Price discovery, process efficiencies, bid evaluation analysis and optimization, and improved stakeholder visibility are among the benefits that eSourcing users typically report.”
While there are numerous benefits to eSourcing as mentioned above, companies report that only 29% currently use an eSourcing and/or Reverse Auctions, with 48% planning to use one. Companies are just leaving money on the table. In fact, automating and linking the two processes makes for a more seamless integration and can generate savings rates that range from 24% to 38% higher on an average sourcing project according to the Ardent Partners report.
JAGGAER makes it easy for you to implement an eSourcing solution into your business with products such as Sourcing Director and Advanced Sourcing Optimizer. Not only do these solutions increase hard cost savings, but there are additional soft savings that can come out of the process. Cost avoidance, process improvements and the value add of improving customer satisfaction are just a few additional examples of how you can work towards being the “Best in Your Business.”
For more ways to optimize your sourcing processes, download the Ardent Partners State of Strategic Sourcing 2015 Report and watch the Herding Cats is not a Strategy: Move Beyond Tactics to Align for Success webinar, which discusses best practices and coming trends for putting practical strategies in place.