Some considerations for spend analysis initiatives

Filed in archive Practical Tips on December 15, 2008

In a large corporation with distributed geographical and system structure, it's a typical for the procurement department not to know exactly what is the cost of capital, or how much company is paying for different categories of products. Actually, this is not a problem related to procurement guys; as companies grow by M&A or penetrate in new countries, the complexity of ERP or procurement system increases and it is not easy to extract data from various ERP systems. That's why many companies have been trying to manage the procurement spending by defining new initiatives for pend analysis, putting dashboards in place (on the top of ERPs) or harmonize systems. (Note: as you can see spend analysis is on the top of procurement agenda, according to Aberdeen)





But that's not all; another aspect which should be taken into account is increase the quality of data. Many companies have a lot of wrong/old data in their systems which don't reflect the reality; analysis of procurement data or suppliers if based on such data could be misleading.

Therefore, in parallel with spend analysis efforts, usually there should be a data quality improvement/cleansing in place to ensure that the output is reliable.