Management Training:
The Procurement Process and Spend Management Training
Spend management is a collection of systems, processes and tools that allow you to collect data on the things your
organization buys and then turn it into intelligence that you can take action on. This gives you some assurance that money is being spent wisely and is under control. This article looks at the ways in which you can use spend management effectively.
Spend data is often dispersed throughout an organization. Some of it will be on your core data systems (such as your procurement to pay system) but some of it could be on spreadsheets, on contract registers kept off line and even in paper records. The task is to collect all of this data, classify it (for example by giving it a spend code) and then turn it into useful business management intelligence.
Once you have done this it will give you insights that can be acted on to deliver value to your organisation. Here are some of the management actions you can take and the benefits you can get from the knowledge gained from spend management using data different sources.
1. Intelligence on what you are buying. This will guide you to opportunities for rationalising the range of things you buy so that you can go to market with bigger volumes and use this to leverage lower prices.
2. Intelligence on which suppliers you are buying from. This will show you any opportunities to rationalise the number of suppliers you are using, again so that you can negotiate with bigger volumes and drive lower prices. It will also allow you to identify any purchases that are made off-contract.
3. Intelligence on who is buying. Particularly in larger
organizations, many people may make purchases. However, not all of them will have the experience to do so. This intelligence will allow you to either train those who are buying so that they can do the job better or give the purchasing task to a skilled buyer.
4. Intelligence on prices. This will allow you to test whether or not you are getting a good price by benchmarking against known standards, even if the standard is what price you paid last time. This knowledge allows you to find a better deal.
5. Intelligence from financial ratios applied to your suppliers. These can often identify those suppliers who are financially vulnerable so that you can take mitigating action to reduce your risk in using them.
6. Intelligence on the policies used by suppliers. This will tell you which suppliers have policies that support yours - policies on areas such as sustainability and diversity.
7. Intelligence from supply markets. This is a whole topic on its own but commonly includes benchmark intelligence on trends and indices relating to market prices. After all, it is good to find out that you are paying prices that are 10% less than last year but if the market as a whole has dropped by 20% your performance suddenly does not look so great.
Steve Carter:
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Subject:
Management Training
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