Goods Spend Analysis

Individual Assignment Goods go past Analysis Prepared by Anjela Li Date January 13, 2012 TABLE OF CONTENTS 1. Introduction3 2. Goods send packing Analysis How is it conducted? 4 3. Key Triggers5 4. How go past compendium fits the procurement strategy6 1. Introduction Spend abbreviationis the process of collecting, cleansing, classifying and analyzing expenditure data with the purpose of reducing procurement costs, improving efficiency and monitoring compliance. It can also be supplementd in other areas of business such as inventory management, budgeting and planning, and product development.There are three essence areas of take place abbreviation visibility, abridgment and process. By leveraging all three, companies can generate answers to the crucial questions affecting their spending, including ? What am I actually spending? ? With whom am I spending it? ? Am I getting whats been promised for that spend? Spend analysis is often viewed as part of a larger domain know n asspend managementwhich incorporates spend analysis, commodity management andstrategic sourcing.Companies perform spend analysis for several reasons. The core business driver for most physical compositions is profitability. In addition to improving compliance and reducing cycle times, do detailed spend analysis helps companies find new areas of nest egg that previously went untapped, and hold onto past areas of savings that they have already negotiated. Benefits of Spend Data Management pic 2. Goods Spend Analysis How is it conducted? 3 major components of a spend analysis Component Activity Typical deliverable (a)Opportunity legal opinion Collect and validate social class spend data/diagnose High level spend analysis company spend savings opportunity ranges Analyze persistence/market trends Sourcing project plan Prioritize and sequence opportunities Sourcing maturity assessment (b)Creation of category profile Define category spend by supplier, spend, Detailed buil dline spend analysis (c)Marketplace assessment region/customer Preferred parts list Determine category requirements, specifications, Industry and issue market analyses forecast Total cost components Determine total cost components Potential switching/ flip out osts (ex replacement cost Conduct detailed supply market and value chain analysis of propane tanks when switching suppliers should be Determine supplier universe and identify potential get hold ofed when creating a sourcing strategy and in the suppliers analysis for potential savings) Collect feedback from stakeholders regarding supplier performance 3. Key Triggers ? Spend by type of goods provides visibility of what the money is spent for and enables further analysis to apply 80/20 rule to define the roundabout 20% of goods that represent 80% of spend. A proper spend analysis by type of goods typically requires splitting main product categories into subcategories to provide visibility of hidden costs ? Spend by a Business Unit provides visibility of spend by end customer, i. e. ho spends the money, compliance rate to the possible hold outing preferred supplier agreements and whether or not the spend is fragmented within the organization ? Spend by Supplier (enterprise view) allows understanding of who the money is spent with, how fragmented spend is within the supplier base and whether an opportunity exists for volume concentration ? Spend by Supplier (by Business Unit) allows visibility of the breakdown of spend among suppliers within a specific Business Unit. This helps to define whether there are common suppliers that are universe used across all Business Units and whether an opportunity exists to gain a better price leverage by consolidating the volume for specific products across all Business Units.This type of analysis also prompts sourcing specialists to require with stakeholders to understand whether there were any supplier performance concerns that might potentially jolt distribution of spend and therefore, should be addressed and considered at the stage of building new strategic sourcing strategies 4. How spend analysis fits the procurement strategy A proper spend analysis allows to build effective sourcing strategies, which can be leverage oriented, relationship oriented or a combination of both (see Figure 1 below). The sourcing strategy for the category will depend on three factors a) How competitive is the supplier marketplace? b) How aligned are your organizations users on the need versus opportunity to test incumbent relationships? ) What alternatives to a competitive assessment exist for your organization in this or connected categories? Typically, if there are categories with High/Low Business impact and Low Market complexity the left side of the Sourcing Gemstone will be used raft Concentration, Best Price Evaluation or Global sourcing. If more complex markets are confronted (Ex sole man-made lake supplier situation, single source supplier due to complexities in the product specifications and/or industry regulations, neglect of substitute suppliers or products, other suppliers vs. the incumbent had critical performance issues in the past, long term industry shortage due to the economic downturn in the global market, etc. we may want to consider Product Specification Improvements, Joint Process Improvements or Relationship Restructuring strategies. It is also important to acknowledge that commonly, the high the maturity of a specific category, the lower is the opportunity to capture high net dollar savings through a competitive event effort and the more is the need to focus on fortify the relationship with your preferred supplier and reap the benefits of a joint effort in areas related to the right field hand side of the Gemstone (Ex product standardization, electronic invoicing, product innovation, etc. ) Figure 1 pic picture Market Complexity (High) High Business Impact