Spend analysis

Visualizing spend patterns

A spend analysis is a method to collect, classify and analyze a company’s spend. It creates a holistic picture of the organization’s costs, identifies savings potential – and in essence lays the foundation for a modern purchasing strategy.

A spend analysis visualizes an organization’s historical purchasing patterns. Based on actual data, procurement can get a clear picture of its spend, including suppliers, spend volume and contract compliance.

It improves procurement’s ability to build a strategic short- and long term plan, enabling procurement to improve forecasting, planning of sourcing waves, cost-out projects as well as support the organization’s ability to project budgets.

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Spendanalys, grundsten till kategoristyrning

The cornerstone of category management

A spend analysis visualizes purchasing patterns, making it easier for procurement to communicate procurement strategies as well as every-day tactical decisions. Spend analysis is data-driven and is used to formulate distinct sourcing and procurement strategies, both for the business as well as for specific categories. As a cornerstone of category management, spend analysis answers questions such as:

What do we buy? Which are our largest categories?
How much do we buy for? What does our spend volume look like?
From which suppliers do we buy? What is the level of contract compliance?
How do we buy? Do we follow procurement policies and processes?
Who in the organization is the buyer?

Tell me more about spend analysis

Call us at +46 8 440 39 30 or fill out our form below and we’ll be in touch. We love to talk about spend analysis and procurement!

Our way of addressing spend analysis

Spend analysis involves four distinct parts: data collection, data cleansing, categorization and analysis.

The data collection phase pulls invoice and procurement data for all spend over a set period – usually 12 to 24 months. Often the invoice ledger data contains inaccuracies, which means that the information must be cleansed, and duplicates and other inaccuracies corrected. Once cleansed, the spend data is mapped against and categorized to reflect the organization’s category tree. Finally, the categorized spend data is analyzed to capture insights and visualize the existing potential.

The four pillars of spend analysis

Data collection – Spend analysis is based on supplier invoice data from the invoice ledger
Data cleansing – Invoice ledger data almost always contains inaccuracies that need to be corrected
Categorization – The data is mapped against and categorized into logical groups that reflect the organization’s category tree
Analysis and visualization – The spend analysis delivers insights into an organization’s historical spend patterns.

Reporting and visualization

Spend analysis enables clear reporting and visualization such as:

Spend by category, organization and supplier
Volume value and pareto analysis
Stock classifications
Portfolio analyses such as Kraljic, Bensaou or Kamann
Relationship categorization.

Potential assessment as next step

Spend analysis can be used as the foundation for a broader analysis of the procurement function – often called potential assessment. By combining the result of the spend analysis with a broader analysis of product characteristics and the supplier market, additional savings can be unearthed. Used in this context, spend analysis is an integral component when developing a distinct procurement strategy.

Spend analysis has never been this simple

Spend analysis is one of the key tools for modern procurement. One of the tools used to analyze spend is Spendency, a cloud-based spend analysis tool.

An intuitive tool

Spendency is an intuitive drag-n-drop spend analysis tool. It is easy to upload spend data and Spendency automatically validates and proposes a spend categorization. Spendency offers detailed analysis and enables the user to get deeper insights providing vast filtering capabilities. With Spendency it is easy to compare historic spend patterns and seamlessly switch between category, supplier or transaction view.

Fact-based basis

Analyzing spend using Spendency provides procurement with factual data vital for strategic procurement and category management. Spendency allows the organization to visualize, communicate and measure the effects of procurement with stakeholders in the organization. In other words, it has never been easier to show the concrete value contribution of procurement!

Discover Spendency

Spendency is a flexible and powerful spend analysis tool. It targets both procurement managers who want to get an overview of the company’s cost development and for category managers who want to study and structure the categories in more detail. It is also an excellent tool for communicating internally in the organization how your costs develop over time.

Spendency was developed by people at EFFSO who had several years of experience in managing spend data. We had tested several other solutions but none of them met our needs. Click on the video to discover Spendency’s strengths!

How frequently do I need to analyze my spend?

A spend analysis can be a resource- and time-consuming activity. Unfortunately, many organizations perform spend analysis as a one-off event. Old data lives on as a truth about what the current purchasing pattern looks like.

This means that the spend analysis becomes singular point effort, and the organization loses the ability to track spend patterns over time. The organization loses the ability to analyze the development of their spend.

How is it to be used?

The update frequency of the spend data obviously depends on how the spend analysis is to be used, but as a minimum measure, the data should be updated once per quarter. This is especially important when implementing new category projects. Real-time updates are usually not necessary as the spend analysis is not a tool to track specific transactions. Organizations with spend analysis processes in place often update their data monthly.

Who will be updating it?

An important aspect to keep in mind is to ensure responsibility for updating the spend analysis data and classifying the new data. EFFSO’s experience is that successful organizations involve finance when extracting new data. When categorizing spend data, category managers should be responsible for their respective categories and classify their spend.

In summary, successful procurement organizations continuously update their spend analysis and use the insight when evaluating and prioritizing future focus areas. Further in-depth information about spend analysis can be found on EFFSO Tools (in Swedish).

Download our white paper "Effective spend analysis"

When you conduct a spend analysis we recommend to start with available data first and only then analyze the need for new order and invoice routines. This is because the benefit of having done a spend analysis at category and supplier level early in the process is very high. Read more in our white paper!

Go to our other white papers

Why EFFSO?

Incomparable knowledge

We have a 100% focus on purchasing and an outstanding knowledge of all parts of this area. We have a profound knowledge of both indirect and direct materials, and not to mention spend analysis. This profound knowledge spans across all types of categories and our broad intellectual capital is based on a well conceived set of tools, templates and methods.

We create lasting results

At EFFSO we are “doers” and specialists. We work together with you as a team to actually get the job done and get results. We enjoy a good relationship with our clients and would like to build a long-term relationship with you to ensure lasting results and a continuous influx of expert knowledge. We can help you find the right tools so that your organisation can handle all the improvements and changes over time.

A better financial outcome

We deliver credible, realised savings and ensure that you get the best possible yield from the hours spent. We deliver a start business case with a focus on ROI and charges that are directly tied to results. Our joint focus on financial results and on knowledge transfer and development in your purchasing team delivers a lasting effect.

A selection of customers by industry

Automotive

BorgWarner

CEVT

Kongsberg Automotive

Toyota MH

Energy, Real Estate & Construction

Bravida

NCC

Vattenfall

IT & Telecoms

Arelion

Axis Communications

Eltel Networks

Mycronic

Retail & Food

Ahlsell

Coop Sverige

ICA Gruppen

Menigo

Public Sector

City of Gothenburg

City of Mölndal

Swedavia

Systembolaget

Processing & Manufacturing

Boliden

Envirotainer

Lesjöfors

Services

High Chaparral

ISS

Kunskapsskolan

Samhall

Other

Bankgirot

MTR

OneMed

Stena Line

Are you looking for help with procurement?

Call us directly on +46 8 440 39 30 or use the contact form to the right and we will get back to you as soon as possible.