With the advent of cloud-hosted and software-as-a-service (SaaS), high-tech e-Procurement solutions are more accessible than ever. Though every procurement team’s priority is managing spend, not every business unit has the advantage of data-rich and transparent spend analysis software to make it easy. How exactly does technology help? To put it simply, spend analysis is your window into strategic sourcing decisions. Sourcing strategy is all about getting the right products and services at the best price. That means this software helps improve the supply chain and cut costs in the process. Let’s find out how it works. Here are 5 ways that spend analysis software saves you money.
- Cleans Up Business Expenditures
The first thing spend analysis software does is clean up your business expenditures. If you can’t make heads or tails of where the money is going, it’s impossible to make better decisions. You need to see clearly where your organization’s procurement spending has gotten out of hand.
A major help in understanding where budgets are spent is by breaking down expenditures by subgroups:
- By commodity
- By vendor
- By division
- By location
By collecting, cleansing, and classifying external expenditure data in these ways, it draws a direct line from your purchase orders to your suppliers. Oversized product streams, spend leakage, and thin distribution all become clear when you can compare real numbers. Your supplier management, inventory management and spending patterns all come together.
Spend analysis software provides it in easy-to-read tables, graphs, and trend predictions. High-tech spend management is available in real-time and at-a-glance so that e-Procurement supervisors can monitor a dashboard of cash flows at all times. No more leaning on your buyers to self-regulate. No more waiting for the quarterly report. Seeing these clean lines makes your budget transparent.
- Decreases Overall Procurement Costs
In order to decrease overall procurement costs, spend analysis software addresses both external and internal activity. Beyond seeing where the money goes in a digestible way, the data cleanup makes it clear where the money is being spent from by classifying spending by purchaser. Spend analysis software goes even more granular from there. Procurement supervisors can pinpoint maverick spending and less-than-efficient business relationships and nip them in the bud. Internal spend analysis makes it easy to locate areas for implementing monitoring controls. These controls also reinforce business compliance protocols going forward.
- Increases Buying Power
Spend analysis solutions put clear purchasing information at your fingertips. That information can be leveraged to increase your buying power and manage indirect spend. For example, imagine that your procurement team patches up a consistent overcharger and reins in a maverick spender. By decreasing spend for your regular supply load, you will realize a surplus. These budgets can be redirected at efficiency-improving measures. This can include anything from purchasing better software to equipping your buyers with e-Procurement enabled mobile devices so they can do business on the go.
- Improves Supplier Relationships
A second type of increased buying power happens by improving supplier relations. Spend analysis software reports by vendor can highlight areas of cost inefficiency that might be exploited. For example, you may drop a supplier with a single product and source that product from an existing vendor. Economies of scale dictate that as your overall purchasing volume increases, your prices go down. Improved business relations can also lead to deals, discounts, bonus product, and first dibs on overstock. Solidifying supplier relationships using spend analysis data now will pay off exponentially down the line.
- Better Decisions with Big Data
Finally, there is a secondary level of information leverage called “big data”. Simply put, big data is what happens when your computer system automatically gathers information, compiles it, and crunches the numbers using business software. This kind of spend data provides suggestions for business decisions based in fact and based on trends specific to your organization instead of industry-wide assumptions. Spend analysis software does all the data collection and integration necessary for big data to work. It feeds activity records to the proper repositories, allowing your e-Procurement platform to assess your big data analytics continuously. It tells you exactly where you fall in your industry. Without spend analysis software, big data is out of reach.
Nowadays this kind of data-rich feed is instrumental to even the most experienced analyst. The ability to process vast amounts of information with the help of smart software allows us to see cost reduction opportunities and improve e-Procurement processes across the board with more informed decisions. This leads to the all-important ability of procuring goods and services at a lower cost.
To find out how you can use spend analysis to gain insight on your organization’s cost-saving opportunities, schedule a 30-minute demo of ProcurePort’s cloud-hosted e-procurement solution today.