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Spend analysis or spend analytics is the process of collecting, cleansing, classifying and analyzing expenditure data with the purpose of decreasing procurement costs, improving efficiency, and monitoring controls and compliance. It can also be leveraged in other areas of business such as inventory management, contract management, complex sourcing, supplier management, budgeting, planning, and product development.
A spend cube is a review of spend data presented as a three-dimensional cube. The contents in the cube are the price and volume of items purchased. Dimensions of the cube usually reviewed include:
# Comparative spend with different suppliers or vendors.
# Stakeholders or cost centers buying the category.
# Categories of a
Overview
Spend analysis is often viewed as part of a larger domain known as spend management which incorporates spend analysis,commodity management
Commodity management is the process of developing a systematic approach to the entire usage cycle for a group of items.
The term is often used interchangeably with category management.
It is generally considered as one aspect of the procurement m ...
, industry spend benchmarking
Benchmarking is the practice of comparing business processes and performance metrics to industry bests and best practices from other companies. Dimensions typically measured are quality, time and cost.
Benchmarking is used to measure performanc ...
, and strategic sourcing. Companies perform a spend analysis for several reasons. The core business driver for most organizations is profitability. In addition to improving compliance and reducing cycle times, performing detailed spend analysis helps companies find new areas of savings that previously went untapped, and hold on to past areas of savings that they have already negotiated.
There are three core areas of spend analysis - visibility, analysis, and process. By leveraging all three, companies can generate answers to the crucial questions affecting their spending, including:
* What am I really spending?
* With whom am I spending it?
* Am I getting what was promised for that spend?
Spend visibility helps chief procurement officer
A chief procurement officer (CPO) undertakes an executive role within an enterprise, focusing on sourcing, procurement, and supply management.
Typically, a CPO is responsible for the management, administration, and supervision of the company's ...
s CPOs and CFOs gain insight into what their company buys and from whom, and it helps them realize savings promised by past sourcing efforts.
Spend cube analysis
A spend cube is a review of spend data presented as a three-dimensional cube. The contents in the cube are the price and volume of items purchased. Dimensions of the cube usually reviewed include:
# Comparative spend with different suppliers or vendors.
# Stakeholders or cost centers buying the category.
# Categories of a commodity
In economics, a commodity is an economic good, usually a resource, that has full or substantial fungibility: that is, the market treats instances of the good as equivalent or nearly so with no regard to who produced them.
The price of a co ...
purchased by the organization.
Software
Automated spend analysis software can be a valuable tool forchief procurement officer
A chief procurement officer (CPO) undertakes an executive role within an enterprise, focusing on sourcing, procurement, and supply management.
Typically, a CPO is responsible for the management, administration, and supervision of the company's ...
s (CPOs) at large, global, diversified enterprises, and a useful tool for many others.A. Bartels, T. Pohlmann, H. Lo and C. Lee, ''Market Overview 2008: Automated Spend Analysis'', Forrester Research, 2008
References
{{Reflist Procurement Business terms