Purchasing has a significant financial impact on business by regulating the issues of quality and delivery of goods. With the changing competitive landscape, the implementation of the effective purchasing strategies is critical for the success of the company. Spend analysis is one of the important stages of developing the purchasing strategies, which requires collaborative efforts and critical analysis of a group of specialists and cannot be performed using sophisticated applications only.
The spend analysis is utilized by the purchasing team for solving a wide range of problems, including the examination of spending patterns, identification of gaps which need to be filled and areas which could be improved.
The comparative analysis of the costs which are spent on various categories of products and the profits which are achieved from them can be helpful for evaluating the effectiveness of the purchasing choices. The performance of various suppliers is another important point of spend analysis, which can be useful for answering the question whether the cooperation with them is profitable and if there are any more advantageous alternatives.
After collecting all the necessary data, the purchasing team processes it and translates it into the information, which can be helpful for the identification of possible improvements in the purchasing patterns, the choice of the suppliers and the terms for cooperation with them. The analysis of the collected data is a complex process that requires well-developed skills of critical thinking and collaboration of a group of specialists and cannot be performed by utilizing applications only.
Considering the wide variety of information which undergoes the spend analysis, the choice of the approach depends upon the peculiarities of particular questions under consideration.
Though there is no universal recipe for conducting the spend analysis, it always demands professionalism and flexibility from the purchasing personnel for analyzing the large quantities of diversified data, drawing the appropriate conclusions from it and translating them into the useful purchasing patterns and strategies. “The types of tools used can range from relatively sophisticated statistical techniques, such as regression analysis to simple graphing techniques, such as Pareto charts” (Bozarth & Handfield, 2006, p. 352).
The sophisticated spend analysis applications can be useful for processing the large amount of data and filtering it, using certain criteria if necessary. At the same time, the responsibility for the following development of purchasing strategies cannot be shifted on the software programs only.
With the changing competitive environment in the market, the development of the purchasing patterns requires taking into consideration the great number of factors that have impact on the end result of their implementation. Disregarding the advances in the sphere of software programs development, the applications cannot replace brainstorming of the group of specialists from various spheres.
For example, the senior management of Santa Clara, the California-based Ketera, emphasized the importance of uniting the efforts of the finance team and the developers of the companies’ strategies for retrieving all the necessary information and processing it in terms of spend analysis. The use of technical applications can be helpful for collecting and processing the data necessary for the spend analysis but remains insufficient for improving the purchasing patterns of businesses.
The spend analysis provides plenty of opportunities for the improvement of purchasing patterns, choosing the best suppliers and enhancing the effectiveness of cooperating with them. The development of the purchasing strategies requires considering the wide range of factors having impact on the output, including the changing competitive market and the risk factors, and cannot be performed by using the sophisticated software applications only.
Reference List
Bozarth, C. & Handfield, R. (2006). Introduction to operations and supply chain management. Upper Saddle River, NJ: Pearson Prentice Hall.