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Spend analysis

Procurement relies upon spend analysis as a trusted ad accurate source of data to track and measure supply chain spend.

What is spend analysis in procurement?

Spend analysis in procurement and supply management can be defined as the process of collection, classifying and analysing expenditure data.

Spend analysis is a process that analyses the historical spend data of your organisation to provide answers to questions concerning spend visibility, compliance and control. It helps to identify risks and opportunities and gives you a useful overview of your organisations costs that will help procurement to redirect spend where it will add value, or a competitive advantage. It helps you to leverage suppliers and refine your sourcing strategy.

Procurement relies upon spend analysis as a trusted ad accurate source of data to track and measure supply chain spend.

 

How do you analyse procurement spending?

Spend analysis should address several key issues. Including, corporate-wide spending, the top commodities that represent opportunities to reduce spend, spend associated with contracts and purchases.

When analysing your procurement spending it’s important to consider the following things.

  • Calculate the organisation-wide spend for each cost centre in the previous year. Then, consolidate the data into one database, eliminating any errors in records.
  • List your top commodities and identify what the spend trend looks like from previous years, and which commodity represents opportunities for reduction.
  • Identify the suppliers which are the most valuable to your organisation.
  • Calculate how much you’re spending with your preferred suppliers and how much is being spent with underperforming suppliers.
  • Calculate the percentage of spend associated with contracts.

Financial management

Explore how procurement can apply financial analysis and the techniques used to minimise costs and reduce risks. Explore Financial Management in Procurement

Financial management key themes

Cost management Cost Analysis Training Whole life costing Total cost of ownership
Value analysis Category management Supplier relationship management CIPS Procurement and Supply Cycle

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