Why spend analysis is important?
Because spend analysis provides knowledge into an organization's procurement activities and expenditures, it allows the organization to identify areas for cost reduction and process improvement.One of the most important steps in spend analysis is to get down to category level analysis.As a year-long intern at Source One, I’ve supported my fair share of client projects ranging from a simple contract negotiation with an incumbent supplier to a total transformation of procurement operations. And, if there’s one theme consistent across all of these projects and main lesson to learn, it is the need to constantly evaluate and assess where and how your organization’s money is being spent. If you constantly monitor and analyze your spend to find room for improvement, the savings will never end. This is true for when procurement is tasked with cutting costs in particular category or even looking to develop a partnership with a supplier with more value-ads. Ultimately it all comes down to the data. Whether you have telecom contracts that are approaching expiration and need to be renegotiated, or you’re looking to go to market for a new raw materials supplier – effective cost reduction initiatives begin with first analyzing your current spend.
What are spend categories?
Both direct and indirect procurement spend can be grouped into categories, enabling analysis and management of similar goods or services. A spend category is the logical grouping of similar expenditure items or services that have been clearly defined on an organizational level.Category Management is extremely valuable to organizations that conduct sourcing initiatives. This is especially true if they want to capture key knowledge around a specific sourcing category integrated within the corresponding organizational spend. This allows for ongoing category-specific measurements, such as rebate programs and Diversity Spend relative to specific items. It’s also essential for managing the overall status of the sourcing program to continually capture the intended cost savings.Our Determine Strategic Sourcing solutions integrate Category Management and Spend Analysis together to provide organizations with deep spend visibility and analysis. With this approach, we provide ongoing and comprehensive “Spend Management.”
What is a spend profile?
The Spend Profile is an expansion of the Estimate that profiles of spend in the estimate throughout the Project. It is to define for each Deliverable how much is planned to be spent and when. The Spend Profile will be used to ensure that the Estimates and Schedule are realistic and achievable.The Spend Profile is an expansion of the Estimate that profiles of spend in the estimate throughout the Project. It is to define for each Deliverable how much is planned to be spent and when.The Spend Profile will be used to ensure that the Estimates and Schedule are realistic and achievable.During the implementation of the Project the Spend Profile will be updated to show the actual spend and where necessary forecast future spends.The resource profile will be derived using the Schedule and Estimate.During the implementation the Spend Profile will be updated using the Resource Reports and Schedule.
