SURVEY: Companies still learning the value of analyzing data
While the leaders excel, incorporating spend analysis is still a challenge to many
By Mike Verespej -- Purchasing, 3/17/2005 7:00:00 AM
When viewing the accomplishments that have been made in spend analysis by today's leading-edge companies (as profiled earlier in this issue of PURCHASING magazine), it would be easy to draw the conclusion that the manufacturing world has the issue of managing its purchasing costs well under control. But that conclusion wouldn't necessarily be accurate.
To be sure, a majority, 61.5%, are doing spend analysis, according to a survey of buyers by PURCHASING magazine. But that also means that almost two of every five companies aren't, or, as some buyers answered, aren't sure that they are doing spend analysis.
What's more, just 58% of the buyers who responded to the survey say that their companies have a centralized data repository for spend analysis—and even less, 55.9%, say that their companies track the benefits of spend analysis. And less than one-third, 32.4%, are using a spend analysis tool or technology as part of their spend analysis efforts.
That's a significant contrast to best-in-class companies that capture purchasing data and manage 100% of their spend—and track the benefits that spend analysis brings to the bottom-line.
The lack of a more complete, or more integrated, adoption of spend analysis isn't because companies aren't aware of the benefits. Indeed, buyers who responded to the PURCHASING magazine survey said their organizations had experienced a number of benefits. Among them: cost savings, the ability to leverage volumes for purchasing, greater supplier identification, supplier reduction, and the ability to use spend analysis to find areas to save money, determine what should be strategically sourced, identify 'maverick' spending and reduce multiple-location spending.
The challenges
Rather, it was the challenges that their companies have encountered that have prevented spend analysis from penetrating deeper into their organizations, say buyers.
Some of the stumbling blocks are fairly typical:
-
Getting people to support initiatives when the data shows that money is being wasted.
-
Difficulties encountered in the actual information gathering or data collection.
-
Negotiating contracts when the American dollar is weak and when raw material prices seem to change daily.
-
Crunching the data and getting it into a usable form.
-
Difficulty in determining the right course of action to take in order to obtain savings from a small or fragmented spend.
But, clearly, the biggest issues, say buyers, revolve around the integrity of the data, the visibility of the data, the accuracy of the data and having accurate data across the organization.
A sampling of their quotes:
"There is difficulty ensuring the integrity of the data," says a buyer for a chemical company. "Purchases are tagged with a commodity code…and can be tagged incorrectly."
"Not all spend data is in the same place," says Richard W. Eaton, manager of global indirect materials and services for Eastman Chemical Co. "Data is coded for transactions for accounts payable—not for analysis of what was bought. And sorting out intracompany spend that is not true vendor [supplier] spend takes work at the detail level."
Adds another buyer: "There is often multiple sources of data from multiple business groups, multiple (and some misspelled) names for the same supplier in multiple databases, multiple nonstandard item descriptions for the same items, inadequate commodity code systems and a lack of visibility on payments made outside the system."
But perhaps another buyer explains most succinctly why spend analysis is so difficult even when intentions are good. "You have to keep cleansing the data because you keep getting more detail about the spend and materials are not always correctly and clearly identified."
Now Playing:
