Improved spend visibility can save 3-5%
Purchasing can deliver greater savings through spend analysis
By Susan Avery -- Purchasing, 5/22/2009 11:39:00 AM EDT
Purchasing operations looking to reduce costs in this economic downturn can help deliver savings of up to 5% in three months simply by understanding what the company is buying and from whom.
A big issue facing many companies today is not knowing where money is going, said Ashok Santhanam, CEO at supply chain consulting firm Bristlecone in Milpitas, Calif., in an interview with Purchasing.com. He explained that multiple divisions may be buying the same items from the same suppliers but at different prices. The company may have several different purchasing systems and items are input with different part numbers or suppliers with different names.
“Being able to pull the data together, standardize it, classify it, categorize it and gain basic visibility to where your money is going is a theme we hear over and over again,” Santhanam says.
Gaining that visibility can help a company save 3-5%, he says. “This is by doing nothing more than identifying situations where one division is paying more than another division for the same item.”
Santhanam sees purchasing’s role as leading the effort to gain visibility into company spending and communicating discrepancies to senior management who in turn execute changes.
Depending on the company, gaining visibility can take as little as three months, says Anil Gupta, vice president of marketing at Bristlecone.
Longer term, companies can further reduce costs by consolidating purchasing and taking a strategic sourcing approach to certain spend categories, Santhanam says. “Spend visibility is the foundation for supply chain management.”
See also: Four tips on spend analysis for small companies
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