The recent recession has set back business in all the companies across the world and has forced organizations to re-evaluate their spending strategies. A crystal clear visibility into the company's spending habits has become a necessity. It has been found that if the supply management is regulated, wasteful channelling of valuable company resources can be reduced to a great extent. But effective supply management is possible only when the ability of accessing, organising and analysing spend data is made competent. Spend data should also be accurate, complete and detailed. This will offer great insight into the spending patterns, inventory status, and compliance and performance rating. With the data yielded from spend analytics tools, businesses will be able to make evidence based decisions. The management will no longer be shooting arrows in the darkness which would add on to an increase in the capacity and saving opportunities at reduced cost. Read on to know more on spend management and tips on how to choose an efficient spend management solution.
How it Works
Spend management is the term given to the process that helps decide how to spend money to obtain a product or a service that will prove to be beneficial for an organization. Outsourcing, procurement and supply chain management are some of the processes in spend management. The entire process is automated to reduce paper based work and to enable faster data classification and real time data retrieval and it provides data based on the type of goods the company is purchasing, frequency of the order placement, cost per product, and who the suppliers are.
Spend analysis is not only required to gain a greater insight into the company's spending, but it is also helpful in creating a tactical purchase plan and enables better strategic sourcing. Through spend analysis, the company can keep track of all the purchases irrespective of the mode of transaction. The system itself is so clearly defined that the procurer has to enter all the data such as supplier performance, supplier diversity, past purchase history etc. so that all the data can be consolidated, classified and stored. The system also eliminates duplicate vendors, thus giving the company an accurate idea of the business undertaken with each supplier. It mandates proper classification of the purchases, which in turn helps in keeping accurate inventory stocks. To increase procurement efficiency, it makes use of reverse bidding strategies to ensure that the company obtains the product at competitive prices.
What to Choose
Choosing the right spend management tool is a key consideration for better spend visibility. Some of the most successful spend management systems greatly rely on the following factors.
€ The system should be capable of auditing the existing spend management parameters
€ It should be capable of accessing the all spend data sources in the organization and outside
€ It should adopt a uniform classification schema throughout the organization
€ It should constantly keep expanding the categories to ensure accurate data classification and validation
€ It should give an accurate, detailed breakdown cost for all the purchases made
€ The software should be intelligent. It should develop data cleansing and classification capabilities with usage pattern
€ It should enhance its features by drawing from business intelligence followed by the organization
€ It should increase the frequency and coverage of spending analysis wit time and usage
€ It should be upgradable so that the tool makes use of advanced reporting techniques and tools