The investment in implementing strategic spend management tools can help to manage data and cut costs. But taking the time to review your source and procure system from all facets can give your company several strategic benefits and financial gains.
Spending management is key to business success
Purchasing management is a key factor of business performance no matter the size of the business. Deloitte surveys companies each year on their supply chain performance, and in their 2014 survey, they divided companies into two sets. They designated one group “supply chain leaders” based on their above-average performance on inventory turn and on-time in-full receiving of product. The other group had a less stellar performance on these two numbers.
Of the top performing group, 79% had higher-than-average revenue growth, while only 8% of the underperforming group had solid revenue growth. The message was clear. Source and procure excellence created higher value for those companies that perform well in their supply chain operation.
Cash flow and budgeting is crucial to all business operations
Spend management tools can impact a company’s cash flow and revenue. Without good visibility into all facets of your purchasing management metrics, choke points can develop in cash flow. A solid purchasing solution can help all areas of the business see where purchases are behind schedule, or where costs are out of line. Keeping purchases moving from purchase order to receivables without waste and delay that can wreck profits.
Competitive differentiation opportunity
Spend planning can offer strategic value by giving your company a competitive advantage. Michigan State University, in a report on strategic sourcing, points out that spend planning should take differentiation factors into consideration.
Using a specific supplier that has a unique product or position in the market can help give your product a premium position in the market. Think in terms of a premium sound system in a car, or a cereal made with brand-name raisins.
Develop better supplier relationships
Using the improved data tracking of a spend management software solution can help you find which suppliers are giving you the best performance to meet cost projections, increasing your inventory delivery times and quality goals. With this information, you can choose the suppliers you offer new contracts or find vendors who can help you develop a new product at the price and delivery times you need.
Great suppliers may hide in your data. Spend management tools can help you find those gems and give them more opportunity to create increased value for your business.
To plan for the future, know first where you are now
Spend management tools can give you accurate reports with ease, but the strategic value of those reports is in assigning true worth to your purchased resources. Take a moment to evaluate your current situation so you’re ready to plan for future success.
Make sure you’re getting what you think you’re getting
When planning the strategic direction of your company, seeing data on your current vendor purchases helps give you a baseline from which to start. Knowing what you’re getting from your suppliers now will allow you to find areas where you could get better performance.
Take a holistic view of current spending
Current source and procure spending for supply invoices might not be giving you the whole picture. Using versatile spend management tools can help you find other indirect costs associated with your purchasing that may affect the true costs of your vendor resources.
Spend planning can help you take in the entire picture and bring in other experts in different parts of the company who can help you find costs that may be out of line.
Reassess actual needs
Getting those in-house experts to offer their insights on your spend planning might also change your future strategy and projections for costs and supplier utilization. Once you can have access to your purchasing data through spend management tools, you can collaborate on changes in your source and procure workflow that will not only reduce costs but give your company a strategic edge over your competitors who have under-performing supply chain systems.