How to reduce costs with procurement spend analysis?
Once spend analysis is performed and major categories of spend are identified, engage in the following analysis for each major category first, then tackle the medium ones, etc. to identify if the prices and costs we currently incur are competitive: Price Analysis: Look at benchmarks related to the price paid by other buyers for the same type of purchases we make. The benchmarks can cover absolute prices as well as trend in price changes over time. This is sometimes sufficient to identify whether our prices are competitive or cost saving opportunities exist. Cost Analysis: This is especially relevant and a must-do after Price analysis is performed, for purchases that are non-industry standard (purchases for which there is no industry benchmarks available because few companies buy these specifications). Cost analysis typically starts by developing a view of the average cost structure of products (or services) sold by the industry that we source from. This can be used to compare to cost b...