What Is Vendor Spend Analysis? 

Having the right suppliers can have a significant impact on your organisation’s success, while the wrong ones can be detrimental to your growth and profitability. To ensure that you are getting the optimal value from your vendors and prevent potential supply chain issues, vendor spend analysis is a critical practice.  

By conducting a thorough vendor spend analysis, you can gain insights into the effectiveness of your business partnerships, helping you make informed decisions about the vendors you should prioritize, the contracts you should renegotiate, and the expenses you should control. Vendor spend analysis provides you with valuable data on your spending patterns and supplier performance, allowing you to identify vendors that are delivering the best results for your business. This analysis helps you streamline your vendor relationships by strengthening ties with reliable and cost-effective suppliers while identifying and addressing issues with underperforming vendors.  

By optimizing your vendor relationships through comprehensive spend analytics, you can maximize the impact of your procurement strategies, negotiate better contracts, and ultimately control your business expenses. If you are planning to optimise your procurement functions and make wiser decisions directed toward controlling your procurement cost, it is important to understand the essence of vendor spend analysis and the benefits it has in store for you. 

Simply put, vendor spend analysis is the process of analysing the expenses incurred by your organisation to procure goods and services from your vendors. Irrespective of the industry it operates in, a company often works with one or more vendors to provide the end products or services to its customers.  The transactions and relationships with your vendors (third-party spend) often have a significant impact on your overall spend. With systematic vendor spend analysis, you can track your spend with regard to every vendor you work with while exploring different avenues to boost your savings. 

Manual Vs Automated Vendor Spend Analysis 

There are two major routes you can take when it comes to vendor spend analysis – you can either gather all your spend data manually and extract insights from the same, or implement a spend analytics software solution to automate the process. Irrespective of the path you choose, you need to ensure that the procedure helps you fulfil the following core objectives: 

•Exploring saving opportunities through vendor negotiation 

•Getting a holistic view of your supplier landscape 

•Identifying areas of increased spend 

•Identifying growth opportunities that can be achieved with controlled      vendor spend 

•Reducing tail spend 

•Analysing vendor risk and tracking contracts 

Let us now have a look at the two types of vendor spend analysis procedures you have at your disposal. 

Manual Vendor Spend Analysis 

As the name suggests, manual vendor spend analysis requires finance leaders and their teams to gather all their spend data, clean it, put it into the right categories, and make necessary assessments. It goes without saying that this is a more tedious and time-consuming process as it relies more on human effort. Moreover, such spend analytics is subject to human error, irrespective of how skilled your team is. A small careless mistake committed at any stage can have dire implications for your organisation. 

Automated Vendor Spend Analysis 

Automated vendor spend analysis resolves all the shortcomings mentioned above by automating the procedure. From cleaning and categorising your spend data to generating robust reports, modern spend analytics software prevents finance leaders from spending more time performing cumbersome tasks and focusing on the bigger picture. 

Benefits of Vendor Spend Analysis For Your Business 

Now that we have understood the implications of both manual and automated procedures, here are a few major benefits automated vendor spend analysis offers your organisation: 

Cost Optimization: Vendor spend analytics enables businesses to get a holistic view into its spending patterns, uncover areas of high spend and revenue leakages, identify cost-saving opportunities and negotiating better contracts with suppliers. 

Improved Supplier Performance: By analysing vendor spend data, businesses gain insights into the supplier landscape and supplier performance, such as on-time delivery, quality of goods or services, and compliance with contractual terms. These insights enable informed decision-making in supplier selection and ongoing supplier management. 

Risk Mitigation: Vendor spend analytics helps identify and mitigate potential risks related to suppliers, such as non-compliance with regulations, supplier concentration risks etc. This enables businesses to proactively address these risks and ensure supply chain resilience. 

Enhanced Strategic Sourcing: By analysing vendor spend data, businesses can define effective sourcing strategies such as consolidating suppliers, leveraging volume discounts, or exploring alternative sourcing options leading to increased procurement efficiency. 

Data-Driven Decision Making: Vendor spend analytics provides businesses with data-driven insights to support decision-making. It enables accurate and timely reporting, visualization, and benchmarking of vendor performance, enabling informed decisions based on reliable data. 

Process Efficiency: By automating spend analytics processes, businesses can save time and reduce manual effort in data collection, cleansing, categorization, and analysis. This allows finance and procurement teams to focus on more strategic activities and value-added tasks. 

Overall, vendor spend analytics empowers businesses to optimize costs, identify savings opportunities, improve supplier relationships, mitigate unforeseen supply chain risks, make data-driven decisions, and improve sourcing strategies. By leveraging these benefits, organizations can achieve greater visibility and control over their vendor spend, leading to improved financial performance and sustainable growth. 

                  Overcome The Challenges Of Manual Vendor Spend Analysis And                            Ensure Intelligent Analytics With Spendkey :

If you wish to get on the digital bandwagon and streamline vendor spend analysis to increase your savings, Spendkey offers a modern spend analytics solution to your finance leaders. From managing vendor relationships and reducing tail spend to categorising vendor spend, Spendkey gives you a one-stop solution for enhancing procurement efficiency and improving your spend under management!