A new generation of expenditure analysis tools offers a route that procurement departments can follow to help their organisations avoid laying-off staff , Alan Low, Managing Director of Purchasing Index, tells SmartProcurement.
The need to save money is universal in the current recession. In these times of austerity, encouraging management and staff of an organisation to use the contracts and agreements put in place by procurement can make the difference between staff being made redundant or staying employed, says Low.
A new generation of spend analysis tools enables procurement professionals to address the top two savings opportunities in many organisations, shown in the inverted triangle below:
Spendtrak, a service provided by Purchasing Index (PI), is one such spend analysis tool.
With instant, interactive analysis of a whole organisation’s spend data, procurement can take proactive steps with specific, relevant colleagues to correct process inefficiencies and incorrect behavior, which are the two main areas, in PI’s experience, which prevent savings from getting to the organisation’s bottom line.
For instance, the view below allows the travel buyer to identify top travelers and their average cost per domestic flight per route and drill down to the individual flights to review behaviour and encourage corrective action, i.e. usage of low cost airlines, advanced bookings, etc.
Not only can these tools help to iteratively make travel policy more effective, but these views can be created interactively while sitting with each traveler. Once management and staff understand that their actions are so highly visible, behaviour will tend to change and business unit management will assist the organisation to realise more of the savings on offer.
In another example, an organisation buying a lot of spares for earthmoving equipment was able to identify (in a matter of minutes) which cost centres were buying spares off-contract and then amend the contract to include them. With part numbers for so many spares catalogues being changed regularly by the supplier, the customer’s coded items had quickly become redundant. Once identified, the resulting savings were easy to achieve.
Procurement is under pressure to deliver actual savings, rather than just set up cost effective supply arrangements. To do this it will need the right tools, and modern spend analysis services will help them achieve their targets and get their bonuses.
Alan Low can be contacted on (021) 873 0100 or at alan@pibenchmark.co.za
