Is your business prepared for challenges in spend analytics?
The COVID-19 pandemic has revealed that outsourcing procurement organisations can scale up fast. But how do they make sure that they are sourcing from the right partners and spending wisely?
The manufacturing and industrial sectors procure from hundreds of global suppliers through complicated supply chains. In addition, the current economic conditions have compelled businesses to implement strategies and programs that are cost-efficient. To ensure reduced costs, organisations need a proven mechanism that analyses the spend data and periodically optimises their processes. Without this, businesses may continue to source from inefficient suppliers at undesirable costs and may even face product shortages or overflows. To determine an accurate and ideal approach to spend analysis, let’s first explore the common challenges businesses face in spend analysis.
Challenges in spend analytics in procurement: Identifying wasteful spend
Traditional methods of spend analysis often poses several roadblocks and are inefficient.* This includes both system and organisational challenges:
Cleansing of data:One should not underestimate the process of extracting, classifying, and normalising spend data. However, traditional rule-based approach to cleansing data is time consuming and can lead to inconsistencies. Manual data could be riddled with inconsistencies, typos, currency variations, and different time zones. This could lead to misguided decision-making. Automated processes save time, but without an efficient management system, like master data management, these may lack accuracy and completeness.
Insufficient resources:Sourcing and procurement analysis requires a strategy that involves identifying, collating, analysing, and executing spend data. Procurement teams often have their hands full with buying materials, managing suppliers, and processing purchase orders. This may lead to a shortage of resources in procurement teams for spend analysis work.
Poor analytics capabilities:One needs expert analytical skills to extract correct reports from collected spend data. This process can be expensive if you hire multiple analysts, statisticians, and mathematicians. Since there are no immediate results, getting a buy-in for such investments is challenging.
Data silos:Large organisations have multiple departments managing their own procurement and spend analytics. Their data and processes are in silos. For security reasons, an individual or a team does not have access to all the data. If the procurement team wants to analyse data, they may have to approach different departments and face varying levels of cooperation. The data could also be incomplete, inaccurate, and inconsistent. This can extend manual efforts and often deliver unreliable results.
Resistance to process change:Finance and contracting teams and customers can often take spend analysis as a threat. The best way to overcome this is to educate them about the benefits of Spend analytics in procurement and thus bring change.
A spend management system can help an organisation overcome these challenges quickly.
The benefits of a spend management system
A spend management system collects, maintains, categorises, and evaluates the spend data from different departments. It helps an organisation throughout the procurement cycle, which includes requisition processing, budgeting, planning, supplier and contract management, inventory management, and sourcing. With a spend management system, businesses can:
- Perform efficient category management services for all the products that they source from the suppliers.
- Benchmark the performance of their sourcing process against pre-decided KPIs.
- Optimise working capital and identify price arbitrage opportunities.
- Extract information from different data silos across business units and generate reports in a uniform format for efficient predictive analysis. This helps organisations reduce procurement costs, improve procurement efficiency, monitor and control workflows, and regulate legal and CSR compliances through approved suppliers.
- Identify better sourcing options by rationalising their supplier base, reduce the maverick spend, and eliminate any duplicate payments. They can manage risk associated with single-supplier sourced items and ensure that critical goods are available on demand.
How Infosys BPM can help ?
To address the challenges in spend analytics, Infosys BPM has introduced ProcureEdge, an enterprise-grade, AI-powered Spend Intelligence offering that helps enterprises in their journey towards a holistic digital transformation. Some of its capabilities include data integration, root cause analysis, spend classification, opportunity identification, and more.
Learn more about our spend analytics services.
*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 on 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.