Spend data, often likened to “black gold” within an enterprise, is a rich source of knowledge that can be leveraged to improve procurement operations. Leading procurement departments have been utilizing spend analysis for over a decade to gain a comprehensive understanding of their organization’s spending habits, trends, and patterns. This understanding enables them to make informed decisions about future spending strategies.
Spend data is akin to an untapped oil field within the enterprise. Its true value is realized when it is extracted, refined through cleansing and classification processes, and then used to fuel procurement strategies and operations. An automated, repeatable, and scalable spend analysis process can serve as a pipeline of value for supply chain professionals tasked with driving savings, managing suppliers, and overseeing compliance.
The Refinement Process of Spend Data
The process of spend analysis involves data extraction from various enterprise systems and sources, data cleansing to ensure its relevance to procurement executives, and classification for a more impactful understanding of supplier-, spend-, and category-specific aspects of enterprise spend. A simple extraction plan is insufficient for an enterprise to derive strategic value from their spend data.
For instance, data related to suppliers providing services like contingent labor, business travel, ground transportation, and facilities services, captured by ERP systems, may show spend amounts but not much else. To gain robust insights into these complex spend categories, the data must be cleansed and classified properly before a thorough analysis can be conducted. Uncleansed and unclassified spend data is akin to unrefined oil – messy, volatile, and far removed from the finished fuels needed to drive operations.
Conclusion
Having a deep understanding of and visibility into enterprise spend is crucial. Supply chain teams that do not take steps towards mining and refining the spend data within enterprise systems risk mediocrity or even failure. However, unlike oil prospecting, drilling for spend data is a low-risk venture. Many supply chain teams, including the best-in-class, have used spend analysis to tap into a well of value that can generate returns for many years. The next step is to learn how these top-performing teams leverage digital, automated spend analysis tools to extract value from their spend data. Stay tuned.
