What is spend analytics?
Spend analytics is the process of identifying, collecting, categorizing and analyzing the spend data of an organization. The goal of spend analytics is to decrease procurement costs and improve efficiencies. Spend analytics help businesses to gain clear visibility and dive deeper into spend data to understand the spending patterns and the supply base, to track the matrices of procurement performance, and to gain actionable insights for spend consolidation to reduce the procurement cost. Also, spend analytics solutions can aid businesses in identifying cost arbitrages, benchmarking internal performances and improving delivery performance.
Identifying opportunities for consolidation of spend and reduce procurement costs is a daunting task for businesses. But we are here to help. Get in touch with our experts now!
Why is spend analytics important?
In today’s complex business environment where leading players are leaving no stone unturned in the quest for cost reduction, spend analytics is considered to be the best way to optimize spend.
Following are the reasons why spend analytics is important for businesses today:
- Spend analytics can be helpful for gaining visibility on spend data and suppliers
- Spend analytics has the ability to streamline procurement processes
- Spend analytics can help in better risk and spend management
- Spend analytics can help significantly in category level analysis.
- Spend analytics can be helpful in building an effective relationship with suppliers
- It can help manage the tail spend in a much better way
How can you control your spend with spend analytics?
Costs are skyrocketing in many industries but that does not imply that companies should raise rates to keep up with current levels of profit. The consistent growth of any business is, of course, important but there is more that can be done on the operational side to keep your profits increasing despite growing industry costs. The formula to succeed here is optimizing the process to contain costs throughout the supply chain. Also, companies can leverage spend analytics to gain spend data visibility across the departments and various business locations. This visibility can help businesses make significant improvements to the bottom line without putting more efforts into customer acquisition. Furthermore, spend analytics helps companies to gain visibility into how their spending impacts business operations.
Here is a list of various ways in which spend analytics solutions can help in controlling costs:
Find potential savings
Spend analytics helps in identifying the specific areas of spend in business and segment the procurement spend data to decrease costs and boost efficiency. This can further help in analyzing the sources that provide the best savings opportunities. Also, such data can be used to negotiate cost savings with suppliers.
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Understand aggregate spend
With the help of spend analytics solutions, companies can gain an understanding of how their spend affects the overall performance of the business. Furthermore, this data can assist in strategic planning and can increase visibility into supply chain operations. The increased visibility allows businesses to gain useful insights into their current procurement processes and then streamline their operations.
Evaluate supplier performance
By leveraging spend analytics solutions, businesses can evaluate their supply chain and can identify dependencies, risks and quality issues in the overall supply chain network. Also, through spend analysis services businesses can identify and rank key performance indicators (KPIs) that are most important to their organizations, and then use this as measurement against their supply chain to determine the performance of the suppliers. Consequently, this can lead to better supplier performance management.
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Challenges businesses face while implementing spend analytics
Lack of understanding
Spend data is usually incomplete, not updated, or isn’t accurate to make strategic decisions based on it. Companies need to understand that they need to collect accurate data for better decision making. Also, they need to classify and segregate the spend data through automated programs to avoid manual errors.
Lack of resources
Traditional spend analysis systems were developed to provide local opportunities and simple strategic programs. Such systems were not able to deal with complex data sources. So, companies need to leverage spend analytics solutions today to understand and analyze complex data sets and institute intelligent spend management strategies to reduce maverick spend.
Lack of capabilities
Companies tend to miss opportunities for savings due to the lack of capabilities to gain 360-degree visibility into their supply chain networks. But by leveraging spend analytics solutions, companies can have better data visualization and can implement the best practices to streamline sourcing and procurement processes.
Manual classification of data
Companies across industries face challenges in data classification. Datasets for each and every company is stored and structured differently. Manually classifying data can be subjective as well as inconsistent. Also, manual data classification is a complex and expensive task for businesses. Businesses following the manual process of data classification tend to miss essential information stored in unstructured data sets. As a result, businesses can leave their most critical assets vulnerable based on incorrect information.
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