Spend analytics: The key to holistic digital transformation in procurement
Procurement is one of the oldest and most critical functions of a business that has evolved with technological innovations and digital transformation.* Spend analysis is one such transformation of procurement function that focuses on decreasing costs, enhancing efficiency, and improving supplier relationships with the help of advanced analytics. Spend analysis is a great way to guide strategic actions and decisions to maximise value in procurement.
What does spend analytics offer in procurement?
Spend analytics offers numerous opportunities and benefits to a business as the analytics transforms raw data into actionable business intelligence. It complements the use of an ERP and sources the data from different areas for analysis to help businesses in:
- Promoting transparency and visibility:
- Identifying opportunities: >
- Managing risks:
- Forecasting spends:
Spend analytics promotes transparency and visibility regarding expenditure on materials and services. Such visibility can offer valuable insights that drive well-informed spending decisions.
Cost saving is one of the key focus areas in procurement. Spend analytics classifies the company’s expenditure across different categories, such as products and suppliers, and allows procurement managers to identify spending patterns. Such patterns can offer insights into the potential cost-saving opportunities through alternative products or supplier consolidation.
Spend analytics facilitates risk management in two ways. It eliminates maverick spending and tracking vendor performance. Spend analytics can offer insights into spend leakage and allows the company to identify and mitigate any maverick purchasing risk. On the other hand, spend analytics offers insights into vendor performance and credibility based on past performance, which can help identify and mitigate vendor-related risks before they cause an issue.
Spend analytics solutions allow a company to forecast upcoming spends based on historical spending insights and market trends. This forecast can help in establishing long-term contracts with key vendors and preparing contingency plans for effective risk management.
The challenges in spend analytics
As spend analytics has become an integral part of procurement functions, spend analytics tools have become a part of procurement technologies. Despite the availability of numerous solutions, companies still struggle to transform their spend data into actionable intelligence. The three main challenges companies face in establishing procurement spend analysis practices are:
- Data management:
- Data visualisation:
- Integrated procurement or sourcing solutions:
There are numerous sources of spend data, both internal (such as AP systems, expense management, and payment consolidators) and external (such as vendor data). Irrespective of the efforts to collect all spend data in a single place (such as an ERP), consolidation of spend data is a challenging task. Different data locations, file formats, and spend currencies can further complicate this challenge. Overcoming these challenges to understand, interpret, and classify such data into different procurement-centric categories demands expertise.
Data visualisation also presents a challenge for efficient spend analytics as interpretation and presentation of information is not straightforward. The end users (sourcing or procurement professionals) need to visualise the spend data to effectively leverage data insights and use them to drive strategic actions. However, many business analytics and business intelligence solutions fall short of effective data visualisation as they may take a long time, require many resources, or lack focus on procurement needs.
Most of the spend analytics tools available currently are a small part of strategic sourcing or procurement solutions. These tools have become a part of procurement solutions to build a comprehensive procurement or sourcing platform. However, this may lead enterprises to operate without enough expertise or a limited understanding of spend analytics implementation and visualisation operations. Therefore, the integrated procurement solutions that attempt to bring all procurement functionalities ‘under one roof’ lack the nuanced expertise and capabilities necessary for spend analytics in procurement.
How can Infosys BPM help?
Infosys BPM offers a comprehensive solution to overcome the spend analytics challenges and allow businesses to move towards holistic digital transformation with the help of enterprise-grade and AI-powered spend intelligence. ProcureEdge, the Infosys BPM spend intelligence tool, augments your existing procurement ecosystem and allows you to overcome business challenges with the help of AI-powered data management, spend classification, and opportunity identification solutions. The four components of Infosys BPM ProcureEdge platform are:
- Data ingestion
- Data preparation
- Data classification
- Data visualisation
ProcureEdge's features allow you to automate data ingestion, data cleansing, data de-duplication, and spend classification.
*For organisations on the digital transformation journey, agility is key in responding to a rapidly changing technology and business landscape. Now more than ever, it is crucial to deliver and exceed organisational expectations with a robust digital mindset backed by innovation. Enabling businesses to sense, learn, respond, and evolve like a living organism, will be imperative for business excellence going forward. A comprehensive yet modular suite of services is doing exactly that. Equipping organisations with intuitive decision-making automatically at scale, actionable insights based on real-time solutions, anytime/anywhere experience, and in-depth data visibility across functions leading to hyper-productivity, Live Enterprise is building connected organisations that are innovating collaboratively for the future.