Supply Excellence — Spend Analysis: What I Learned From You

Spend Analysis: What I Learned From You

March 15th, 2007 · by Tim Minahan · No Comments · Top 5 Supply Strategies, spend analysis

Yesterday, I had the pleasure of hosting a panel of some of the greatest minds in the spending analysis arena:

Forrester Research’s Andy Bartels gave an insightful look into his firm’s latest research into spend analysis trends. He also provided helpful scorecards for selecting the right approach and solution provider for your company.
Abbott Laboratories’ Todd Grunert gave a first-hand account of his company’s incredible spend analysis adventure.

I will profile their comments and advice in upcoming Supply Excellence posts. As a teaser to their useful recommendations, I wanted to share the findings from an online poll conducted at the last Top 5 Supply Strategies webinar I hosted, Jumpstarting Spend Analysis Success, featuring supply experts from PriceWaterhouseCoopers and Alliant Techsystems. (You can get a replay or download the slides from that webinar here.)

The 112 supply management executives participating in this latest survey revealed why so few companies have clear visibility and understanding of how much they are spending, on what products or services, or from which suppliers. As the below slide indicates, most supply management organizations continue to execute spend analyses on an infrequent, ad-hoc, and limited basis. They also primarily use manual procedures,spreadsheets, or basic homegrown databases to collect, classify, and analyze spend.

(Click image to enlarge.)

Lack of visibility into timely, detailed, and accurate spend data limite spend leverage, hinder compliance, and cause supply managers to develop sourcing and supplier strategies in the dark. (Sort of like touring the Grand Canyon blindfolded. You know it’s there. You know it’s vast. But you’re missing the important details. And that first step could be a doozy.)

As you can see from the below slide, poll respondents still view spend analysis as most appropriate for defining sourcing strategies, increasing spend leverage, and monitoring compliance. This limited use of spend intelligence is due in large part to the onerous challenges in acquiring, classifying, and analyzing the data in the first place.

Both Andy and Todd shared intriguing examples of how turning spend analysis into a repeatable and automated process opens up new opportunities for leveraging spend data for other business initiatives, such as master data cleanup, parts standardization and reuse, and, even, merger and acquisition (M&A) support.

The good news from the poll is that both supply managers and corporate executives are beginning to understand the importance of spend analysis and supporting automation. (This also came through in Forrester’s research, which predicts 20% annual growth rates in spend analysis automation investments for the next few years.) Cost pressures due to tightening supply market dynamics and tougher scrutiny from CFOs and regulators has brough the spend deficiency syndrome into the corporate spolight.

Check back here in the coming week for some helpful tips on how to determine the right spend analysis approach and solution for your company.

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