The major function of the buyer is to know its supplier base and keep on looking for new suppliers that can bring better cost and technology to the organization. With the large information available nowadays there are lots of suppliers that are being managed by a buyer and the organization. It is very important to manage these suppliers well. With e-procurement it is worthwhile to add suppliers to the overall supply chain in order to enhance the performance of the whole program.
This result in ensuring long lasting bond that can generate lower costs and quicker turnaround on sourcing and payment activities. The major benefits of Supplier Network Integration are:
1. Today Organizations are increasingly moving towards the process wherein suppliers can see the current and future programs of the Manufacturer thus building their own production and sales plans. This helps in clear and efficient communication between the supplier and manufacturer. Also suppliers can update and react immediately to any changes quickly.
2. Suppliers are being sent both RFQ (Request for Quote) and PO (Purchase Order) electronically through EDI or XML thus saving lots of money for the organization. This not only reduce the paper work done by the organization (good environmentally also) but also results in quick turnaround by the suppliers. This also reduces chances of having any manual error thus making the system more efficient and reliable.
3. Suppliers also can see their payment amount due and payment due date. Also if there are any issues with the invoice submitted or any reason in delay in payment. The quick sharing of information through the system helps in quick resolution of the issue.
4. The best benefit of all is for organizations as they can quickly see the spend under each supplier and can make their future strategies based on the data available.
Tuesday, June 30, 2009
Tuesday, June 23, 2009
Spend Analysis
Spend analysis is the process of aggregating, classifying, and leveraging spend data for the purpose of gaining visibility into cost reduction, performance improvement, and contract compliance opportunities. It is part of an overall spend management and visibility process that includes the analysis, award, and monitoring of corporate spend. Additionally, it is the first and last step of the strategic sourcing process that drives total value.
Spend Analysis gives out the data regarding who is Buying, What is being bought, from whom, from where, and at what price.
Spend analysis can be an important competitive advantage for companies that use it, especially in highly competitive industries. It enables companies to out-think and out-execute their competitors by helping them lower costs and leverage supplier relationships. Spend analysis consists of six phases, which are repeated cyclically on a quarterly, monthly, or even weekly basis. The level of effort is highest during initial dataset construction; subsequent refreshes require significantly less work. The fifth step, Spend Decision, ties spend analysis directly to the overall sourcing process.
1. Collection, Consolidation and Translation
2. Cleansing and Categorization
3. Data Enrichment
• Commodity Mapping
• Data Extension
4. Analysis, Assessment and Reporting
5. Spend Decision
6. Refresh and Maintenance
Implementing a successful spend analysis project is not necessarily easy. It takes a lot of work and a lot of challenges will need to be overcome, especially the first time the organization undertakes a considerable spend analysis project.
In getting a spend analysis project up and running, the challenges are the following:
• Lack of Spend Understanding:
Chances are that organizational spend data currently exists scattered throughout disparate
Systems, each of which uses different classification schemes; consequently, no one knows for sure how much is spent on the same supplier, or the same commodity, across the organization.
• Lack of Resources:
A sourcing team might have difficulty obtaining the C-level executive buy-in they need to help them secure the budget and support that is required to ensure a successful
spend analysis project.
• Required Analytics Capabilities:
Significant analytics capabilities are needed both for the extraction and cleansing of the data and in the execution of the spend analytics process. This is true from both a technological perspective and a human resource perspective.
Once a spend analysis system is in place, there are a number of studies that can be performed that improve visibility with regard to appropriate sourcing strategies. These data studies include building commodity-specific datasets, identifying areas for demand reduction, monitoring contract status, detecting fraud, and running an opportunity assessment.
While challenges exist, there is great reward for those companies committed to a spend analysis project. Companies that leverage best practices will contribute to the overall success of a spend analysis project in more ways than might initially be visualized.
A list of best practices includes:
• Identify Business Needs and Organizational Goals
• Define Corresponding Spend Visibility Requirements
• Understand and Baseline Organizational Spend
• Identify and Segment Key Commodities
• Leverage Category Expertise
• Have a Holistic Approach
• Analyze Continuously
• Utilize Decision Support Tools.
• Ask the Right Questions.
• Cover the Majority of Global Spend.
• Institutionalize Knowledge.
• Invite Everyone to the Party.
• Build More Than One Dataset.
Note: The Article is essentially taken from eSourcing Handbook. The article is only meant for reference for people interested in topic. Additional details about the topic/ Book are available on http://www.esourcingforum.com/archives/category/blog-aggregator/
Spend Analysis gives out the data regarding who is Buying, What is being bought, from whom, from where, and at what price.
Spend analysis can be an important competitive advantage for companies that use it, especially in highly competitive industries. It enables companies to out-think and out-execute their competitors by helping them lower costs and leverage supplier relationships. Spend analysis consists of six phases, which are repeated cyclically on a quarterly, monthly, or even weekly basis. The level of effort is highest during initial dataset construction; subsequent refreshes require significantly less work. The fifth step, Spend Decision, ties spend analysis directly to the overall sourcing process.
1. Collection, Consolidation and Translation
2. Cleansing and Categorization
3. Data Enrichment
• Commodity Mapping
• Data Extension
4. Analysis, Assessment and Reporting
5. Spend Decision
6. Refresh and Maintenance
Implementing a successful spend analysis project is not necessarily easy. It takes a lot of work and a lot of challenges will need to be overcome, especially the first time the organization undertakes a considerable spend analysis project.
In getting a spend analysis project up and running, the challenges are the following:
• Lack of Spend Understanding:
Chances are that organizational spend data currently exists scattered throughout disparate
Systems, each of which uses different classification schemes; consequently, no one knows for sure how much is spent on the same supplier, or the same commodity, across the organization.
• Lack of Resources:
A sourcing team might have difficulty obtaining the C-level executive buy-in they need to help them secure the budget and support that is required to ensure a successful
spend analysis project.
• Required Analytics Capabilities:
Significant analytics capabilities are needed both for the extraction and cleansing of the data and in the execution of the spend analytics process. This is true from both a technological perspective and a human resource perspective.
Once a spend analysis system is in place, there are a number of studies that can be performed that improve visibility with regard to appropriate sourcing strategies. These data studies include building commodity-specific datasets, identifying areas for demand reduction, monitoring contract status, detecting fraud, and running an opportunity assessment.
While challenges exist, there is great reward for those companies committed to a spend analysis project. Companies that leverage best practices will contribute to the overall success of a spend analysis project in more ways than might initially be visualized.
A list of best practices includes:
• Identify Business Needs and Organizational Goals
• Define Corresponding Spend Visibility Requirements
• Understand and Baseline Organizational Spend
• Identify and Segment Key Commodities
• Leverage Category Expertise
• Have a Holistic Approach
• Analyze Continuously
• Utilize Decision Support Tools.
• Ask the Right Questions.
• Cover the Majority of Global Spend.
• Institutionalize Knowledge.
• Invite Everyone to the Party.
• Build More Than One Dataset.
Note: The Article is essentially taken from eSourcing Handbook. The article is only meant for reference for people interested in topic. Additional details about the topic/ Book are available on http://www.esourcingforum.com/archives/category/blog-aggregator/
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