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What Advantages Does Conducting a Spend Analysis Offer?

What Advantages Does Conducting a Spend Analysis Offer?

Definition of Expenditure Analysis
Spend analysis refers to the process of reviewing both current and historical corporate spending with the goals of identifying opportunities for cost savings, improving strategic sourcing, and reducing procurement costs.
A spend analysis is potentially the most adaptable type of analysis in the procurement field. Nevertheless, there are those who question whether the investment of both time and money was worthwhile. In light of this, let's look at the six most common benefits of conducting a spend analysis here in this article.


The Advantages of Conducting a Spend Analysis
enhanced prioritisation and resource allocation, which ultimately leads to enhanced performance
The opportunity assessment is critically important to both the distribution of procurement resources and the dimensioning of those resources. According to our findings, there is a direct connection between the success of the procurement function as a whole and having a good spend analysis solution, developing a good opportunity assessment, and being able to invest in procurement. This finding is based on the fact that there is a direct correlation between the success of the procurement function as a whole and the ability to invest in procurement.

Making economies of scale and expertise possible through the management of purchasing categories.
Utilizing the information obtained from a spend analysis makes it possible to consolidate all of the internal demand for products that are related to one another. After that, the combined volume is presented to the suppliers so that they can compete for it. The larger consolidated volume results in increased competition and lower costs once the goods have been shipped to their final destination.
ensuring that the savings anticipated in contracts are actually realised in practise
The ability to measure actual savings requires having access to a reliable spend analysis solution that is kept up to date on a regular basis. In addition to its role as an input for the majority of the categories utilised in the calculation of realised savings, the system ought to be capable of locating a good portion of the leaks described earlier. For example, you would have a list of all the products along with their previous prices, and you would be able to calculate the achieved realised saving by using the volumes and new pricing that were provided by the spend analysis system.


Performing checks to ensure conformity
In the area of procurement, implementation leakage is a major problem, particularly in the case of indirect goods and services, where, over the course of time, some categories fail to realise more than fifty percent of the savings that were identified. The leakage occurs whenever a new and improved solution is created but is not fully implemented in all situations. The majority of the time, the problem can be traced back to a relatively small group of individuals who are unaware of the new solution or to vendors who do not adhere to the new contract in its entirety. In either case, the result is the same; there is a gap between the savings that have been identified and those that have actually been realised, and this gap has a tendency to widen over the course of time.