Spend Analysis

This is the starting point of any strategic sourcing job. A spend analytic identifies the spend into major categories and allows for classification of the spend into major categories. This leads to further investigation of the spend and to strategize based upon the importance of the spend. An important point to realize here is that the strategic importance of a spend is not just related to the price or the quantum of spend, but also to the risks associated with the spend. Therefore, the spend analytic only does a part of the job in determining the quantum of spend and classifying the spend. Strategizing the spend is another ball game that will be dealt in a short while.

Here also there are a number of spend analytic tools to aid us. When you google for spend analysis you will find a number of softwares on the right handside. However, I have never used any of these, therefore I will not be able to describe the same to you neither will I be able to recommend you any. I have however, used spreadsheets for the same and they are very effective. Here I will talk about three tools that I have been able to develop. The first two tools developed are not specific to any organization and may be developed anywhere. However, the third can be developed with ease when you have a central purchase department or data of different departments are available easily.

Ø Total Spend Analytic
Ø Material spend analytic
Ø Marketing & Admin Spend analytic.