Spend Analysis and Spend management play a critical part in the procurement process. When you begin the conversation about the return on investment (ROI) of these softwares, things can quickly become complicated.
On one side of things, procurement professionals commonly can see the value of a spend analysis from the beginning. Information is power in 2019, and learning about what you don’t know, and the gaps in your company-wide spending habits and trends can be hugely impactful. Spend analysis provides a foundation for your business to pinpoint areas in strategic sourcing through initiatives and various other methods based on distinct pain points.
On the other side of things, spend analysis can be strenuous on upper management when there is no clear return on investment provided. Typically, top management cannot view the sourcing process and usually are not expected too. Because of this, it is recommended that you allocate a figure to your specific spend analysis. It’s quick, easy to digest for decision-makers, and keeps everyone happy, but does that make the most sense?
Here are some insights to help provide a deeper understanding of the ROI of big data in spend analysis.
What Exactly Is the ROI of Spend Analytics?
In short, the more significant the spend, the bigger the savings. However, that thinking relies heavily on your procurement’s ability to interpret and analyze big data.
From our vast experience working with thousands of procurement teams over the years, value creation from spend analytics can be challenging to obtain compared to the cost of the solution or software. Companies that have less than a $50 million yearly spend, the ROI can be hard to justify, especially to decision-makers. This is why tools such as excel (which should be left behind in 2010) remain popular.
Procurement savings generally have a low and high range. For example, if your company had a 100 million annual spend, you are projected to save at least $1 million within the first year of using spend analytics to power your business decisions.
e-Procurement software that conducts spend analysis also provides you with the following:
- Creating a strategic category management program
- Pinpointing overpayment to suppliers
- Decreasing maverick spending via contract compliance
- Organizing invoices, products, and suppliers seamlessly
- Designing and implementing e-Auctions
The amount of value spend analysis gives your company is overwhelming. Improved spend visibility provides your business with insight that can be used to guide your procurement process. Commonly, the biggest hurdle businesses are faced with is not the data, it’s the skills required to access the data and make sense of it all.
Using e-Procurement Tools To Get A Higher ROI
There are various reasons as to why e-Procurement tools can help your business achieve new heights. Understanding the software helps you to not only understand the value but also to inform and educate others on how it is helping your business succeed.
Big data in spend analysis gives you a major return on investment through cost savings you can achieve from suppliers. According to a recent survey, 53% of the return on investment was made directly of lower costs with suppliers thanks to guided decisions made from big spend data. There are various other reasons for the increased ROI, from the ease of supplier comparison, and the increased ability to clearly define the suppliers that would give you the best value for money.
e-Procurement software allows negotiations with suppliers to become the most efficient version of themselves, creating a dialogue that breeds better deals. The software also enables you to gain an in-depth understanding of your supply, which helps you to pinpoint the lowest prices and the best resources. Over a long period, these savings and decisions will pay off considerably.
Wanting to see how e-Procurement software can supercharge your business and provide an unmatched amount of ROI for your business? Try a FREE demo of our software, where our solutions specialists will help you through your questions and concerns.