What is Spend Analysis?

Spend Analysis, also known as Spend Analytics, is a process to identify, gather, cleanse, group, categorize, and analyze a business’s spend data. The primary motive of using spend analytics is to decrease procurement costs and enhance efficiency by improving visibility and transparency. With real-time data and analytics, you will be able to get your hands on actionable insights that you need to save money and gain efficiency.

There are three primary elements of Spend Analytics – visibility, analysis, and process. Once you understand these three elements, you will be able to identify how much you are spending, on what you are spending, and the ROI on that spend.

However, Spend Analysis is just one element of Spend Management. Spend Analysis in procurement is utilized to help you visualize all your data so that you can make better sourcing and supplier decisions.

For effective Spend Management, you need accurate and actionable data — Spend visibility is the very first step. Spend Analysis will enhance the data quality and identify cost-saving opportunities and valuable insights into your business. It will enable cost minimization initiatives that will help your organization long-term using preferred vendors.

Benefits of Gainfront’s Spend Analytics

–> Easily track what items you purchased and from which vendors

–> Identify maverick spending

–> Enhance compliance and spending patterns

–> Quantify, verify and prioritize cost-saving opportunities

–> Simplify your procurement process

–> Track compliance and fraud

Maverick Spend can be defined as purchases of goods/services made outside of procurement rules and guidelines of the company, either intentionally or accidentally. This kind of spend can have a negative impact on the business.

Controlling Maverick Spend is not only about reducing cost. For instance, your business may have publicly committed to stepping away from sourcing products that have palm oil. However, a maverick might not understand this or undermine the reason by placing an unauthorized order with a vendor who utilizes palm oil in their products.

Reasons for Maverick Spend

–> Distributed procurement

–> High indirect spend

–> Futile & time-consuming procurement processes

–> Competitive maverick spending

–> Lack of robust purchasing controls

Tail spend management typically refers to the various high-volume, low-value transactions that take place in an enterprise and are usually not managed by the procurement team.

In most organizations, nobody actively handles tail spend management. The procurement team might set up policies, norms, or systems for buyers to follow, known as a “Set and forget” approach.

There is no specific book definition for Tail spend as it can include anything from maverick spend to misclassified items. So it is essential to identify what tail spend is in your enterprise. Also, it is equally essential to know the length of the tail concerning your enterprise’s core, strategic suppliers.

However, tail spend includes the following:

→ Not actively controlled by the procurement team

→ Decentralized to buyers in the market

→ High-volume but low-value, but can also include low-volume or one-off purchases

→ Tactical, not strategic

→ Indirect procurement

→ Vague or complicated to track and analyze

→ Under the spend threshold

Direct Spend Management refers to the end-to-end procurement process that organizations utilize to purchase goods and services that are directly involved in the manufacturing of a product. Effective Direct Spend Management can build supply chain resilience and agility.

Gainfront’s Direct Spend Management solution is a totally integrated, intuitive, and transformative software that can understand your spend and increase your savings. With Gainfront’s Spend Analytics, your business will be empowered to obtain greater product success and supply chain resilience via improved vendor/supplier engagement and supply chain collaboration across the product lifecycle.

Diversity Spend Management or Diversity Spend is the procurement amount that was spent only with small and diverse businesses.

Why does a company need diverse suppliers?

Government agencies and various other corporations are needed to set aside a certain amount of their purchasing budgets for diversity qualified suppliers.  Now, these suppliers require the diversity certification to be eligible for consideration for purchasing bids from both the government and other private entities.

The Spend Cube typically reviews spend data that is presented as a multidimensional cube. In other words, Spend Cube is three dimensions of spend data—Vendors/Suppliers, Corporate Business Units, and Item Classifications. The spend cube is a graphical illustration of spend analysis output.

Benefits of Spend Cube:

• Reduction in cost
• Increased value-add offers from the crucial suppliers
• Better relationships with important suppliers
• Having a preferred supplier list (PSL) in place
• A reduction in the supply base

Effective Spend Management is running an end-to-end procurement process, right from the opportunity to savings realization. It means identifying business spend that should be brought under management, creating a strategic savings plan, and taking control of that spend to improve realized savings.

Gainfront’s Spend Management is an enterprise Spend platform that offers comprehensive spend management capabilities, including spend analysis, supplier management, category management, and procure-to-pay.

To understand the influence of the state contracting decisions on diverse businesses, Diversity Spend Reporting is the state asking its contract vendors to track and report whenever they associate with such businesses.

Gainfront’s Spend reporting solution is highly customizable and can support multiple ways to effectively track your diversity spend such as Tier-1 and Tier-2 spend, direct and indirect spend, etc.

–> Easy-to-use spend analysis dashboard

–> Import spend and supplier data

–> Support for Tier-1 and Tier-2 Suppliers

–> Support for Direct and Indirect Spend

–> Automatic email reminders