NAME: ROMOKE OJO MODULE 2 SESSION 1

STUDENT ID # 2001691 GOODS SPEND ANALYSIS ASSIGNMENT

Goods spend Analysis is the process of organizing a company’s spend, leveraging

spend data for the purpose of gaining visibility into cost reduction, performance

improvement and uncovering hidden savings opportunities. Spend Analysis consist of

three different components which are; Suppliers, Customers and Commodities and

Services. Each component should be measured in dollars and number of transactions

which should be a potential source of improvement and cost saving. I believe spend

Analysis serves three internal user groups in a company which comprises of:

❖ Leadership of the organization usually the chief executive officer and chief

Operating officer who needs up-to- date reports to drive strategic direction.

❖ Managers, Accountants or Chief Financial officer who need to drill down into a

spend data set to explore specific areas of interest or track down payment

specifics.

❖ Sourcing power users who need to locate, drive, and monitor the next set of

savings initiatives.

Goods spend Analysis consists of both direct and indirect spend and my organization

deals with both. I will be discussing the various steps I will use in conducting goods

spend analysis in my organization.

The first step is to identify the system containing spend data in my organization; there

are many systems and sub-systems such as accounts payable, invoicing systems,

purchase order management, expense report data, agreements and contracts, policies,

purchasing card data etc.

The second step is collecting the spend data from identified sources, because of the

complexity of the organizations accounting systems, there are multiple processes and

financial databases containing data associated with purchasing. A survey of

applications would determine which underlying data sets contain data relating to

procurement and spend but once the data sources are identified, their structures and

contents are evaluated and the relevant records would be extracted.

The third step would be transforming the data into a usable format, once the data sets

have been extracted, data profiling can identify the similarities and differences to

determine data mappings as well as gaps in completeness, so appropriate

transformation would be applied to convert the many data sets into a standard format.

The fourth step is to consolidate the data into a single repository, once the data

sources are identified, their structures and contents are evaluated and relevant records

have been extracted, analyzed and consolidated, then they are categorized along

different dimensions.

The most significant challenges involve the collection, organization and

presentation of data analysis, I would say that spend analysis is ultimately a data-

driven process which is not an easy task.

Above all, there are two specific key triggers that I have identified in this spend

analysis processes, the first one is the high dollar value for suppliers and the second

one is high dollar value of commodities or services.

In my organization, one of the products purchased is pipeline, we have four

different suppliers of pipeline but there is a high dollar value for these suppliers so I

have decided to go for bidding of pipelines products, whereby I chose the best bidder

who happened to be one of the suppliers with whom we’ve had a long relationship

with and we have agreed on a 10% bonus discount on the products which enables my

organization to benefit from a competitive rate and guaranteed quality from the sole

source supplier.

In relating to the second trigger which is the high dollar value of commodities or

Services, because of the multiple suppliers of pipeline my organization had, there

had been different prices for the same products which had increased the dollar value

for both the services the organization was delivering and the commodity itself but if

my organization sole source from one supplier, it would cut down on the high cost

and improve on its strategic sourcing. Procurement is of vital to the organization,

therefore my organization’s corporate goal is to provide value and satisfaction to the

customer and this can be achieved with a low-cost high-quality supplier (single

source). Once the organization had decided to single source and still maintain it’s

high quality products, the potential opportunities are reducing cost through volume

discounts, opportunities to enter into a stronger relationship and improved services.

In getting the goods spend analysis up and running, there are some barriers or

Challenges my organization would most likely face, these are but to mention a few:

Lack of spend understanding: the spend data that currently exists in my organization

are scattered throughout disparate systems, each of which uses different classification

schemes and no one for sure knows how much is spent on the same supplier or

same supplier or same commodity across the organization.

Another challenge that my organization would most likely face is inaccurate,

Inconsistent or incomplete data, goods spend analysis is particularly dependent on

high-quality and accurate data collected from across the organizations. If incomplete

or inaccurate data was used; it will require a labor-intensive solution in a short term.

Resistance to change is another key barrier or challenge to a good spend analysis in

my organization, despite the fact that change is the most constant thing that happens,

spend analysis can be misunderstood. It can represent a threat to stakeholders,

customers, contractors or suppliers, the best way to address this is to inform and

educate all those concerned so as to have a better understanding of what spend

analysis is all about and it’s importance to the organization.

In Conclusion, in order for goods spend analysis to be successful in my organization,

It requires adequate staff, realistic goals, good communication to all stakeholders and

corporate buy-in. Goods spend analysis is an on-going process that gets better over

time. Some other benefits of good spend analysis is a good approach in standardizing

and managing the data management and analysis processes, so that individuals can

exploit actionable knowledge while continuously measuring the success of the

program.