Even the best-run departments will be put on the front burner for closer inspection soon, given the stifling economic climate.

So before you get the phone call — or worse yet, the bean counters show up one morning — it pays to get your ducks in a row. That way, you’re more likely to remain in the driver’s seat and be the moving force behind any changes (rather than getting swept up by them).

Many companies are engaging in a practice known as “spend analysis.” It is just what it sounds like: A way to determine what’s being spent, with whom, and for what. 

According to Spend Analysis: Optimizing Your Sourcing Process, a research report from Bristlecone, this is most often a two-step process: Three “big picture” action steps, and seven targeted action steps.

The “big picture” steps:

• Prioritize your sourcing needs, in order of importance and cost
• Examine the number of suppliers you’re currently using and seek out opportunities to increase spending with a smaller number of suppliers, in exchange for volume discounts, and
• Turn attention inward and redouble efforts to plug any financial leaks in the purchasing process.

Next, experts suggest you identify areas for improvement — and what the anticipated payoff is for those improvements. That also will help your company prioritize what aspects of the purchasing operation should be targeted first.

By focusing on:

• materials/services costs, companies can cut costs 2% to 12% by making sounder sourcing decisions
• supplier management, companies can reduce or eliminate “double” suppliers
• contract compliance, companies can improve compliance by more than 50% and save up to 7% by stronger management of contract pricing
• regulatory compliance, companies won’t have to be concerned about overlooking regs
• inventory management, companies have cut stock by up to 50%; inventory costs have been reduced 5% to 50%, and expediting costs have been trimmed as well
• product management, companies can increase part re-use and reduce unnecessary parts by 20%; integrate suppliers and design strategies, and
• process cycles, companies can make changes through spend analysis that often run between 30% and 50%.

Tags: compliance, inventory, product, sourcing, supplier, suppliers