Last week, we looked at the top Spend Management priorities as uncovered by the survey responses of 225 procurement organizations (download full report here). Since “identify savings opportunities faster” was the top challenge named in the survey, and frankly, gaining spend visibility is really the first step in any strategic attempt to uncover strategic, cost cutting opportunities, let’s look at some key things best in class organizations are doing to gain visibility into who, what, when, and with whom they are spending their money.

Spend visibility is critical to identifying savings opportunities faster. While survey respondents recognize the importance of understanding what is being purchased and from whom, they continue to struggle with disparate data, inconsistent product information and limited analytics capabilities to conduct spend analysis. They are also challenged to get visibility into the majority of spend categories, leading to lost spend leverage and missed savings opportunities.

So, what are the best in class procurement/finance organizations doing to overcome these challenges, provide good spend visibility, and most importantly, identify savings opportunities faster?

Our research found that there are 3 things leading organizations do:

1. Consolidate supplier “family” - Creating an accurate supplier parentage across key commodities will allow you to consolidate contracts and more effectively negotiate master agreements.
2. Ensure data integrity - As the saying goes, garbage in, garbage out. Cleanse and standardize your data across systems and functions so that you can act on it. An easy way to do this? Restructure your commodity codes using a standard UNSPSC model and map UNSPSC to General Ledger accounts.
3. Develop a category strategy - Weigh internal spend leverage and compliance opportunities against external supplier and supply market dynamics to determine where your greatest opportunities for savings lie. Then develop a strategy and timeline for sourcing across major categories to lock these opportunities in and ensure that no savings are left on the table.

The full report is available here and expands on the research methodology, results and actionable advice for companies looking to gain insight into their spend.

Hari Candadai is Director of Solutions Marketing for Ariba and author of The Return to Profitability: Spend Management Priorities to Accelerate Savings and Drive Long-Term Growth, a global study of spend management priorities and strategies.