{"id":9584,"date":"2019-06-24T20:12:03","date_gmt":"2019-06-24T18:12:03","guid":{"rendered":"https:\/\/sourcing-force.com\/?p=9584"},"modified":"2022-11-17T11:01:37","modified_gmt":"2022-11-17T10:01:37","slug":"how-to-drive-procurement-benefits-from-spend-analysis","status":"publish","type":"post","link":"https:\/\/sourcing-force.com\/en\/how-to-drive-procurement-benefits-from-spend-analysis\/","title":{"rendered":"How to Drive Procurement Benefits from Spend Analysis"},"content":{"rendered":"

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One of the most frequent questions we get from our clients is hands down: What is the best approach to use and identify savings opportunities through spend analysis?<\/span><\/p>\n

This is an excellent question. There are a wide variety of opportunity analyses that can be conducted directly within a good spend analysis tool. <\/span><\/p>\n

We find many of our customers and partners following a similar path time and time again with an overarching theme of “start with the basics and generate quick wins”.<\/span><\/p>\n

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1. Identify Leverage With Existing Suppliers<\/strong><\/span><\/h2>\n

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As part of our spend program<\/a><\/strong> we commonly include supplier linkage data (parent\/child) which identifies corporate families. <\/span><\/p>\n

This is as basic as it gets – gaining an understanding of which suppliers are owned by the same parent entity. In many cases existing agreements can be consolidated and renegotiated with the parent entity.<\/span><\/p>\n

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2. Supplier Rationalization<\/span><\/strong><\/span><\/h2>\n

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This is a straightforward analysis commonly using the Pareto principle (80\/20)<\/a><\/strong> that highlights how many suppliers comprise 80% of the spend for each category.<\/span><\/p>\n

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Using this type of analysis we can quickly identify the categories where there are too many suppliers comprising the bulk of the spend. <\/span><\/p>\n

These categories are then flagged for “further detailed analysis”.<\/span><\/p>\n

My personal preference is to take the Pareto principle<\/strong> a couple of steps further and conduct a 70\/20\/10 analysis – showing how many suppliers comprise 70% of the spend and how many suppliers comprise the bottom 20% and the bottom 10% (although the breakout can be anything). <\/span><\/p>\n

This yields enhanced visibility into the number of suppliers that make up 70% (or 80%) of the spend along with the number in the bottom 20% and the bottom 10% of each category. <\/span><\/p>\n

The additional 20\/10 buckets allow us to see how many small suppliers we are managing for each category – additional consolidation opportunities.<\/span><\/p>\n

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Many organizations have some sort of preferred supplier list either managed in a procurement system or sitting in a spreadsheet on someone’s computer. <\/span><\/p>\n

Including this information in the spend analysis application<\/strong><\/a> will provide immediate visibility into two areas:<\/span><\/p>\n