Supply Excellence — Why Spend Analysis?

Why Spend Analysis?

September 6th, 2007 · by Tim Minahan · No Comments · spend analysis

Yesterday, Aberdeen Group released its latest and biggest benchmark into spend analysis performance and approaches yet. Based on a survey of purchasing, supply chain, and finance managers from more than 700 companies, the study provides authoritative evidence that efficient and repeatable (read: automated) spend analysis drives measurable improvements in spend under management, negotiated savings, compliance, and productivity. The key benefits turned up in the study are quantified in the table below.

(Click table to enlarge.)

Aberdeen’s benchmark also reaffirmed that companies with top-performing spend analysis programs have some common attributes. They are:

Twice as likely as their peers to deploy a solution to automate spend data collection, cleansing, and analysis
40% - 90% more likely to establish executive support for spend analysis initiatives
40% more likely to utilize spend analysis reports that provide details at the transaction [or line-item] level
30% more likely to have enterprise-level visibility into spend

The payoff of such automated and formalized spend analysis capabilities is compelling. Aberdeen reports that “higher levels of spend analysis automation help drive superior levels of spend under management” as well as greater savings. In fact, the benchmark found that top-performers (what Aberdeen calls “Best-in-Class” companies) reported negotiated an average of 12.7% savings across overall spending after spend analysis. And savings generated from improved spend analysis didn’t waver much across categories, with most Best-in-Class firms reporting about 12% cost savings even for direct materials.

Yet the most compelling part of Aberdeen’s Spend Analysis Benchmark is that it is the first analyst report to provide a clear, easy-to-follow recipe for building a business case for investing in spend analysis automation and program improvements. We will examine the business case for spend analysis tomorrow. In the interim, download a complimentary copy of the full report here.

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