In today’s competitive business landscape, procurement professionals constantly seek ways to optimize costs and maximize value. Spend analysis has become vital in this pursuit, offering valuable insights into historical spending patterns and identifying potential cost-saving opportunities. However, relying solely on spend analysis can limit your cost-saving potential. This blog post will explore how procurement professionals can leverage the power of spend analysis while incorporating other strategies to develop a well-rounded approach to cost savings.

Spend Analysis Fundamentals

Spend analysis is the process of collecting, categorizing, and analyzing an organization’s procurement data. By examining past purchases, spend analysis helps identify high spending areas, categorize suppliers, and uncover hidden costs. This data can then be used to negotiate better deals with suppliers, consolidate purchases, and streamline procurement processes.

However, it’s important to remember that spend analysis primarily focuses on historical data. While valuable, past trends can’t always predict the future. Unforeseen market shifts, changes in customer behavior, and unpredictable human decision-making can all significantly impact future demand.

Beyond the Data: The Value of Internal Interviews

Procurement professionals should go beyond the data and conduct internal customer interviews to gain a more holistic view of future demand and spending trends. These interviews provide an opportunity to gather insights directly from the people who use the procured goods and services.

Here are some practical steps for conducting effective internal interviews:

• Preparation is Key: Develop a clear interview objective and a list of targeted questions. These questions should focus on future spending plans, potential changes in demand, and supplier performance evaluations.
• Identify Key Stakeholders: Conduct targeted interviews with individuals who have a direct influence on procurement decisions, such as department heads, project managers, and key end-users.
• Active Listening: Practice listening skills to understand the interviewee’s perspective and capture valuable insights.

By incorporating internal customer interviews into your processes, you can better understand future demand fluctuations and make more informed procurement decisions.

Consider these Statistics:

83% of procurement professionals said that less than 50% of their procurement processes are automated, highlighting the need for more robust spend analysis processes.

Only 6% of companies report full visibility on their supply chain, while 69% do not have total visibility. Effective spend analysis is crucial for gaining visibility into procurement spending.

Getting Better Results 

There are several additional strategies you can employ to enhance your practices further:

• Market Research: Stay informed about current and projected market trends that could impact your procurement costs.
• Supplier Collaboration: Work closely with your suppliers to identify potential cost-saving opportunities, such as volume discounts or early payment incentives.
• Technology Integration: Consider software that can automate data collection and analysis, freeing up your time for more strategic tasks. Automating spend analysis has various benefits, such as controlling vendor spend in real time, streamlining procurement, reducing excess spending, and saving time.

By combining spend analysis with these additional strategies, you can develop a comprehensive, data-driven, and future-oriented approach to cost savings.

Conclusion

Spend analysis is a powerful tool for procurement professionals, but it’s just one piece of the puzzle. By incorporating internal customer interviews, market research, supplier collaboration, and technology, you can leverage the full potential of spend analysis and develop a robust cost-saving strategy.

Visit NLPA Learning, the new home to all of our certifications and online courses. The Learning site also includes learning resources, including live and on-demand webinars, publications and reports, articles, templates, white papers, and more!

Recommended Reading

• Calculating Cost Savings In Multiple Years
• Cost Savings Potential