Spend Analysis & Data Analysis
Robert Knieriem
BUS 307
Professor Ray
May 21, 2012

In today’s fast paced, technology heavy corporate world, data that pertains to any and every business aspect, regardless of size has become ever more important in daily operations and decision making. The data that results from these operations and decisions and its collection, analysis and concluding into upcoming decisions will have a deciding factor in how well or how poorly the company operates in the future. This data is made on its own, but putting it together and making sense of it all remains the challenge today’s companies have and continue to deal with. Data analysis and critical thinking skills are important to spend analysis because this information put out requires a human element to understand what is really being put out. As mentioned by Purchasing, data is only data until it’s analyzed and acted on, and only then does it become valuable information to the company. Further, today’s companies who actively collect data are finding themselves looking for those with the knowledge and skill to analyze this data and allow the company to act upon it (Bozarth & Handfield, 2008). Even with today’s most powerful software which simplifies the task of collecting and maintaining this data, the process of analyzing and understanding of this data requires the human touch and only someone with this background and knowledge can put the data into easy to read, easy to understand information that can be widely used within the company. Because these reports can be quite extensive, spread over multiple departments, suppliers or even software platforms that may not be compatible with each other, the need for someone with data analysis and critical thinking skills is irreplaceable. The data can be collected and displayed in its raw form, but even with this advanced technology, there is no “one click” to analyze and conclude the data. As Jon Martin, a purchasing manager in southern California says, “most canned reports don’t give you the information you really need in daily purchasing or planning activities. This data exists in the systems but the company must utilize commonplace techniques to get what they need from the data (Bozarth & Handfield, 2008).” A structured process such as Six Sigma can be easily integrated into a company’s spending analysis activities with great success. Statistically, Six Sigma quality will generate only 3.4 defects per million opportunities. However, when thought of as a process improvement methodology, Six Sigma can be considered as one that focuses on utilizing rigorous data analysis to understand and ultimately minimize variation in these processes. The first process of Six Sigma is a collection of steps known as DMAIC or Define, Measure, Analyze, Improve, and Control (Bridger, 2007). Similarly, the steps required for data analysis are quite alike. The first step in this, before any data is even looked at or pulled from the system is to define what the data the company wants to look at and have a full understanding of their spending activities and what data qualities they want in their final reports. The remaining steps in both processes can go hand in hand with how often the data is updated and analyzed, how current company processes can be improved and how they can maintain these optimum conditions. Bridger goes on to say that good spend analysis techniques, coupled with Six Sigma, can help “bridge the gap” with data, or the lack of information available because it sits on multiple platforms across various departments, suppliers or organizations. When working with spend analysis, it is very important to utilize the assistance of other key departments within the organization, namely, the finance department. By going through accounts payable or invoice systems and obtaining purchase orders, invoices and other pertinent data, the spend analysis team can quickly and easily get fast results to show a project has good value and potential. Further, members of the finance department have the training and knowledge to sift through its own data systems and pinpoint the most valuable information from the reports and can verify any financial reports or answer any questions the spend analysis team has right on the spot (Bozarth & Handfield, 2008). Additionally, it would be beneficial to the spend analysis team to utilize the help of the purchasing department, the accounts department and other similar key departments that exist within the organization, given its core business activities, such as asset management for example. While the finance department tracks and keeps records of money going in and out of the organization, through payments to suppliers, payroll, building and asset maintenance, and by payments made from customers the purchasing department is the one who purchases goods from suppliers pertinent to the success of the organization with information given from finance. Understanding where they’re spending money will help the spend analysis team see where company money is being committed. Like the purchasing department, account managers are the ones charged with keeping existing customers and finding new ones and working out contract negotiations. With valuable data from them, the team can know how valuable and key a customer is to the company given its role to the company’s success. Today’s companies create endless amounts of data and thanks to continuous improvements in computer software are able to track an unlimited amount of variables with very little work. However, even with this, companies still must rely on the human element of sifting through countless reports and endless amounts of data to extract the necessary information needed and to identify trends and correlations. These reports can present any type of data the company wants to track, but it still requires someone with the knowledge and skills to read these reports and turn the data presented into information the company can act upon.

References
Bozarth, C.C. and Handfield, R.B. (2008). Introduction to operations and supply chain management (2nd ed.). Upper Saddle River, New Jersey: Pearson Prentice Hall.
Bridger, T. (March 2007). Six Sigma and Sourcing: A Profitable Partnership. Retrieved May 19, 2012 from http://www.inlogik.com/LinkClick.aspx?fileticket=U4ZMC1sateE%3D &tabid=913&mid=5309