Money makes the world go round. While this statement may be a little reductive in its nature, it is certainly the truth when it comes to procurement. Procurement revolves almost entirely around spending as a business activity. Therefore, as such an integral aspect to such a vital system of organization-wide processes, it goes to reason those firms and managers would want a way to evaluate, track, and make informed decisions based on spending data. As such, spend management solutions began cropping up to assist companies in addressing and analyzing the massive amount of data being recorded.
Procurement technology saw this as an easy bridge to fold another set of features into their comprehensive software. By off-loading a large portion of the data analysis to procurement software, your organization gets a boost in efficiency and productivity, while also seeing fewer data-related errors, and gaining deeper insight into the organization’s operation as a whole.
Spend Management: The Basics
Spend management emerged as a series of procurement solutions that are focused on collecting, organizing, categorizing, maintaining, and evaluating data as it relates to procurement spending, compliance, efficiency, and overall productivity.
These tactics are designed to result in an organization that excels in efficiency and cost reduction without sacrificing the quality of contracts. To create an effective, spend management strategy, your procurement professionals will need to first understand the flow of spend management at its core.
At its most basic level, spend management is just a series of processes for data collection and analysis. As such, it requires that there first be a data source. Therefore, creating a data repository from the various sources of procurement spending is the first step in any spend management strategy. In order to analyze the data, it first needs to be centralized.
Once your team has successfully compiled and collected all of the necessary data into a single source, then it can be categorized and cleansed.
This step is just as important as the first because no system is perfect. In your data pool, there could be repeated data points or other aspects that cause meta-analysis in later spend management steps. Furthermore, categorizing the data is integral to finding accurate results as you and your team will need to tell the program how to treat different types of data points collected.
Finally, comes analysis, strategy, and decision making. Luckily for procurement professionals of today, the analysis is mostly done for you. Sophisticated procurement technology, like that offered by ProcurePort, uses a combination of automation and artificial intelligence to create a much more effective and efficient data analysis tool.
As the procurement professional, this allows you to more quickly run data reports while resting assured that the analysis will be done properly and the results accurate. This leads to a much more efficient spend management process, allowing your staff to focus attention on more significant business activities.
Spend Management and Supplier Management
Spend management goes hand-in-hand with supplier management. In fact, most procurement technologies have a supplier management software of some sort included in their scope of capabilities. This is beneficial as it creates a more comprehensive solution for procurement professionals that is contained to a single software or program while offering a wide range of features for the entire procurement lifecycle.
Spend management is a core aspect of supplier management because often the one leads to actions in the other. For instance, if your spend management team discovers an existing and renewed contract with a supplier for widgets that your company doesn’t even use anymore, your supplier management team can use this information to appropriately sever that non-value relationship, and save the firm loads of potential dollars.
Building a Comprehensive Procurement Solution
Technology has had a massive impact on the way businesses conduct their operations. This can be seen in virtually every industry across the globe, and it’s a trend that isn’t going anywhere. As such, the next step for many industries is taking the various software and platforms in use and melting them together into single, more comprehensive software-based solutions.
In procurement, this means combining entire sectors of the procurement life cycle such as contract management and supplier management, or spend management and procure-to-pay software; ultimately, leading toward an all-in-one, comprehensive procurement solution.
A Brief Summary on Spend Management in 2021
Sourcing in the supply chain, procurement strategies, and procurement technologies are always evolving, shifting, and advancing. As we draw nearer to a close of the global pandemic that rocked the world and dictated the vast majority of our past year, these evolutions in procurement technology and operations are bound to roll out faster and faster through 2021, and beyond.
For more information on spend management software, or the trends of spend management in 2021, keep browsing ProcurePort. ProcurePort is the internet’s premier place for everything procurement, from knowledge and information to software and technology, and everything in between.
