Goodbye “Spent” Analysis: Welcome to a New Era of Spend Optimization

As companies work to remain agile in this up, down, backwards, and sideways economy, it’s not surprising that business leaders’ eagerness to “return to normal” might leave some pondering exactly how to optimize spend with supplier relationships to maintain savings and performance targets.

We hear a constant refrain about supplier relationships: “Ugh, we overestimated our spend volume and overcommitted to a supplier.” Or “it takes so much work to get my suppliers on track to actually give me what they promised, and I don’t have hard data to back me up.” And finally, “the vendors aren’t compliant and it’s eating into MY savings targets!”

So what can spend optimization and spend visibility do for you? Turns out, it’s what spend visibility is connected to holistically that really matters. Stay with us for a second here.

This is the New Year to Focus on Spend Optimization

Here at SpendHQ, we think it’s time to get more performance from your spend (and suppliers, for that matter). General spend visibility solutions are great backward-looking views into the money that went out the door, but no money is actually saved and no supplier performance is improved until the execution process where suppliers are being managed through contracts and scorecards. It’s spend vs. spent, and there’s a big difference.

Take committing to spend volume, for example. When you negotiate with a supplier to pledge a certain amount of forward-looking spend, with associated pricing and discounts [potentially with breaks for various volumes], those spend volume commitments should be captured in a system just like in the contract. The same goes with the performance commitments in the contract and the supplier scorecard.

In other words, “spend” is what you pay, but performance is what you get. It’s all connected.

That includes supplier performance around quality, delivery, and pricing/billing compliance that must be monitored… but performance also includes procurement’s own derived performance on savings (which is based on spend).

“Spend” is ongoing and future-looking, and should be completely interconnected with contracts and supplier scorecards, including performance and compliance. Sure, insights can be gleaned from a forensic backward-looking spend analysis, but not nearly so much as when spend is communicated ongoingly to suppliers through a spend/savings planning process that is also integrated into the contract and supplier performance management process.

Procurement professionals must aspire to be “spend aware” in this sense. Only then can you get both spend savings management (generally reduce pricing/spend) and spend performance management (increase supplier performance that you get from that spend).

If spend is disconnected from contracts, scorecards, and budgets/financials (so CFOs can reap the benefits, as well), then nobody will be on the same page, suppliers will never be clear, you’ll continue to overcommit and not have the data you need to back you up, and you’ll never turn backward-looking forensic spend visibility to forward-looking [spend/supply] performance that aligns everyone.

What You Need for Full Spend Optimization — And Spend Visibility

Your spend data often lives in multiple platforms, and it’s also often coded differently in several of those. For full spend visibility, you need one clear view into all of your spend — no matter where it originates.

A spend analytics platform goes beyond the capabilities of general BI tools (and certainly leaves your old Excel spreadsheet lightyears behind), delivering the insights you need into:

  • Supplier Diversity
  • Category Management
  • Preferred supplier compliance

… and much more.

SpendHQ lives and breathes ongoing spend awareness, helping organizations leave “spent” analysis exactly where it belongs: in the past.

SpendHQ was created for procurement experts by procurement experts to provide the visibility needed to drive savings for clients. Initially commercialized in 2012, our team of developers and sourcing professionals have grown it into one of the most innovative spend analysis solutions on the market.

 

Solve the debate on build versus buy for spend visibility. Download the free e-book now.

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