Editorial: Spend analysis leaders
Purchasing's 2005 winners are driven by more than just reducing costs
Mike Verespej, Editor-in-Chief -- Purchasing, 3/17/2005 2:00:00 AM
They can all easily recite the cost savings they've brought to the bottom line of their companies or the percentage by which they've reduced the amount of spend in their organization. But talk to any of our leaders in spend analysis long enough and it's clear that their objectives go far beyond reducing costs.
Leaders in spend analysis are out to take their organization to the next level and create a clear competitive advantage for their company.
This year's winners are no exception.
The Teradyne Semiconductor Test Division, for example, has cut its $500 million annual spend by about 10% each of the last six years. But, more importantly, asserts Scott Cameron, outsourcing manager at the Teradyne Semiconductor Test Division, "spend analysis and cost management has enabled us to maintain a competitive edge in our industry," and maintain profit margins.
Spend analysis also can create new thinking in an organization, says Michael Farrugia, executive vice president of supply management at Canadian bus manufacturer, New Flyer Industries, which today has 98% of spend under control compared to just 50% three years ago. "Buyers are not [typically] trained to think in terms of total costs." But the system New Flyer has put in place, he says, literally forces them to look at the total cost involved—including freight and inventory costs—not just price.
In another vein, Waste Management is using its spend analysis data to develop more meaningful relationships with its suppliers and to get them involved in projects such as the development of hybrid trash collection trucks.
Kennametal uses its data in supplier reviews and as a strategic tool to understand where its best opportunities for savings exist.
But perhaps Tom Linton, chief procurement officer of Agere , sums up best how the value of spend analysis goes far beyond cost-cutting. "I'm a big believer that that you can use spend analysis to develop strategic partnerships...that will help you and [your suppliers] maintain your competitiveness."
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