Better visibility of supplier spend is a critical requirement for the success of today’s supplier management programs. This is especially true for those enterprises that have complex and extensive supply chains and that source on a global basis.
Better visibility of spend delivers a number of key bottom-line benefits to these enterprises, including a substantial boost in buyer leverage and reduction in costs resulting from the increased transparency enabled by an accurate, comprehensive view of each supplier relationship. Beyond the bottom line, better spend visibility also is essential to ensuring the success of an enterprise’s supplier diversity program.
Minimizing Costs & Increasing Leverage
Correctly collating, grouping and categorizing suppliers is critical for accurate spend analysis. To maximize buyer leverage and minimize supplier costs, companies need to better understand if they are doing business with more than one “related” company in a family tree or corporate structure.
By being able to identify these families, they can leverage their spend for more favorable contract terms. Additionally, they can reduce costs and increase leverage by migrating away from related companies with low spend to families with more spend.
The acquisition of a major drug maker by another provides an excellent example of the power of better spend visibility. This purchase presented the challenge of cleaning up and enriching two disparate systems related to their shared suppliers. Analysis of supplier records discovered that the two drug makers did in fact have overlap in supplier spend by the combined companies. By identifying overlapping suppliers in each category, the acquiring company could consolidate supplier spend in each category.
Additionally, by identifying parent/child linkages, the acquiring company could consolidate its spend by supplier family. By going beyond the routine collection of supplier and diversity information by implementing an advanced supplier intelligence and analytics dashboard framework, the combined company enabled its supplier managers to quickly visualize supplier trends and opportunities to ensure a more effective spend with its supplier organizations.
Real-time Spend Analysis in the Cloud
Supplier managers today can take advantage a cloud-based, software-as-a-service platform that is powerful and easy-to-implement, allowing any Excel user to analyze corporate-wide spend, from any dimension and to any level of granularity, in real time. With this information, they are able to identify the best sourcing opportunities, reduce business risk and track employee purchasing to monitor maverick spend. And there’s an added bonus: by establishing appropriate controls, today’s supplier managers are able to ensure supplier contract compliance.
Today’s spend visibility analytical platforms also provide supplier diversity managers with the ability to measure an organization’s diversity spend. They allow the analysis of spend by business unit, by general ledger account, by cost center, by commodity, and other critical spend attributes -- enabling an accurate baseline to be established and progress towards goals to be monitored.
These analytical platforms also provide the ability to reach out to prime suppliers to collect Tier 2 diversity spend data, verify spend, and generate executive-level reports. They are designed with the flexibility and real-time diversity status verification capabilities needed to allow the Tier 2 spend reporting tool to match an organization’s diversity program guidelines.
By boosting leverage and reducing costs through increased supplier transparency, better visibility of spend clearly is key to the success of today’s supplier management and supplier diversity programs. For more information on maximizing spend visibility for supplier relationship success, visit our website.