Spend Analysis
Spend analysis in procurement is the process of
collecting, cleansing, categorizing, and analyzing expenditure data
to understand how an organization is spending its money. The goal is to
identify cost-saving opportunities, improve efficiency, and enhance supplier
management.
Key Objectives of Spend Analysis:
- Gain visibility into total spending across categories, suppliers,
departments, and geographies.
- Identify savings opportunities through supplier consolidation, better
pricing, or demand management.
- Ensure compliance with procurement policies and contracts.
- Evaluate supplier performance and risk.
- Support strategic sourcing decisions.
Core Steps in Spend Analysis:
- Data Collection – From ERP systems, invoices, POs, and procurement cards.
- Data Cleansing – Remove duplicates, standardize names, correct errors.
- Data Classification – Group spend into categories (e.g., office supplies,
IT services).
- Analysis & Reporting – Use dashboards and metrics to assess trends and spot
anomalies.
Common Metrics in Spend Analysis:
- Total spend by supplier, category, or business unit.
- Maverick (off-contract) spend.
- Spend under management.
- Savings achieved or projected.
Benefits:
- Reduced costs through strategic sourcing.
- Increased compliance and reduced procurement risk.
- Better budgeting and forecasting.