Spend Analysis

Spend Analysis, the first step in Strategic Sourcing, etablishes the spend baseline and enables the quantifying of both the potential and the actual cost reductions.  It involves gathering a significant amount of data and covers two areas: Demand Analysis and Supply Analysis.

Demand Analysis is a must in order to better understand how and when the organization plans budgets and what information the Strategic Sourcing function needs to produce and deliver as part of that process. An effective Demand Analysis process is based on proactive communication with stakeholders, early involvement in key projects, efficient use of your time, and a TCO Analysis.
Supply Analysis is primarily about securing supply. It evaluates the suppliers’ risk profile and determines how to manage existing suppliers through an effective Supplier Segmentation process. Although the complexity and depth of  evaluating the supplier’s risk profile depend on the supply category – a pencils supplier is very different than a contract manufacturer of nutritional supplements – it is typically based on an evaluation of  four general areas: Financial Stability, Quality, Supply Dependability, and Responsible Sourcing.