It’s not about what you have; it’s how you use it. Anyone can collect data, but more and more organisations are struggling to visualise it in a manner which leads to actionable insights.
Over the next month, we’ll be taking a deeper dive into all that spend cubes can offer, from categorisation and compliance, through to the holy grail of opportunity analysis. Be sure to keep in touch with this space as we demonstrate how clear spend visibility can transform your procurement function – and your organisation.
What is a spend cube?
- What are you buying?
- Which department are you buying it for?
- What is the spend with different suppliers?
- The spend value that can be influenced by procurement
- Direct and indirect spending levels
- The spend and number of suppliers per category
- Changing trends
What is the purpose of a procurement spend cube?
A major task of procurement officers is developing sourcing strategies. This can only be done if you know where your spend is going, which is precisely what a spend cube reveals. It breaks down complex information and makes it accessible and understandable to all departments.
- Generating grater cost savings simply through better spend visibility, which allows an organisation to crack down on maverick spending and improve contract compliance, among other things.
- Allowing the procurement team to develop stronger and more strategic vendor relationships.
- Improving purchasing power.
- Identifying and reducing risk exposure.
This is all about shifting procurement away from cost reduction and towards value creation. With such detailed knowledge of the total spend, procurement is in a far better position to align sourcing habits with the company’s overarching goals and values.
For instance, many businesses are working hard to incorporate more minority-owned small enterprises in their supply chain while simultaneously eradicating those vendors who needlessly pollute. Neither can be done without an intimate knowledge of how your money is currently being spent.
What is the spend cube process?
Developing a usable and impactful spend cube relies on cutting edge spend analysis powered by modern AI and machine learning. It’s a process of identification, collection, cleansing, classification and –finally – analysis.
- Identification. Measure total spend and narrow focus to specific product categories, suppliers, departments, etc. Multiple spend cubes can be developed to target multiple dimensions, such as contract spend analysis, tail spend analysis, category spend analysis, and so on.
- Collection. Capture the spend and translate into one format. Spend across an organisation is often stored in multiple languages (Excel, ERPS, GL codes); the best spend analysis software consolidates it all.
- Cleansing. All the spend data is reviewed for accuracy and any errors (discrepancies, redundancies, corrupted files) are corrected.
- Classification. A further refinement of spend data. This usually involves grouping expenses for similar goods and services and assigning them to particular categories using a comprehensive taxonomy.
- Analysis. With spend data collated, mapped and now visible, actionable insights can now be gleaned, such as:
- Buyers following protocol and only working with approved buyers.
- Contracts are in place and appropriate for the good or service being purchased.
- Multiple vendors that can be consolidated.
- Opportunities to diversify the supplier base.
Purchasing Index’s Spend Analysis Suite
Purchasing Index has developed a cutting edge suite of dashboards to lay bare an organisation’s spend. With the right visualisation, an organisation can easily identify trends and anomalies, or drill down into supplier specifics across any category.
These dashboards have been designed for easy navigation no matter which department is seeking clarification or insight. The different views include:
- Spend summary
- KPI overview & performance
- Spend analysis
- GL/cost centre analysis
- Supplier pareto analysis
- Supplier segmentation and geo-analysis
- Period-on-period analysis
- Detailed search function
As with all organisations, your performance metrics, systems and processes are unique. To help our Spend Analysis Suite merge seamlessly with your systems, our dashboards are highly customisable, from the colour palette of the layout to the reports generated.
And if your organisation isn’t familiar with spend analysis software, never fear. Like all good software, our Spend Analysis Suite comes with a comprehensive guide, but it’s also worth noting that we offer a personalised training session for your team as part of the service.
Remember to stay in touch over the coming blog instalments as we take a deeper dive into the various stages of a rigorous spend analysis.