How Can Spend Analytics Help Companies In The Wake of COVID-19?
Knowing about your spending, what, where and when you spend is crucial information for every business. What you do with the data can provide long-term and short-term value, if you know how to utilise it. During times of disruption, like we are presently experiencing, the capability to access and optimise data is essential, not just for procurement but for the entire organisation. However, in this crisis, CFOs might be overlooking the value of spend analytics on the organisation's future performance.
Now, what is Spend Analytics?
Spend Analytics is the process of accumulating, processing, and analysing procurement data. Spend analysis unveils business buying patterns through an in-depth review of procurement data. Businesses utilise these buying patterns to manage their suppliers, to track procurement performance, and to decrease cost.
Effect of COVID 19 on Businesses
The Covid-19 pandemic has shown how tough and effective procurement organisations can be. But how can we make sure that we are spending correctly and as per our requirements?
What are the opportunities available to improve efficiencies, develop an even more resilient supply chain, deliver with greater speed, and be adaptive to other changes that might come our way, like another wave of the pandemic or something like Brexit???
When we look back and see the way in which this pandemic has changed the ways in which we procure and interact with our suppliers, there is an opportunity for businesses to understand how spend analytics can provide better visibility into the spending through transparency, monitor and improve spending, provide decision points, recognise gaps between demand and supply and help us respond to these challenges in a quicker and a more effective manner.
We all have seen how NHS scrambled its forces together to assemble the essential Personal Protective Equipment (PPE) kits needed for its hard-working medical and frontline staff and how the decentralised nature of this giant organisation did not really help with the leverage it could have otherwise had.
We all might have experienced empty shelves when we went to the local supermarket to stock up on essential products, such as bread, flour, etc.!
COVID 19 crises have made us realised how little equipped our retails chains were to respond to the huge demand for items like hand sanitisers and face masks.
So how then do companies make sure that they get the balance right, even for the times when such situations arise in the future between identifying opportunities to generate savings, meeting the demand-supply gaps that arise, and above all, keep the focus on a sustainable supply chain? The answer is Spend Analytics.
Present day's modern, the digital-first corporate has procurement expectations far beyond what the average business would have had just about 5 years back. The process of choosing, implementing, and regretting enterprise purchase decisions has not changed for the past three decades. In these cases, Sales cycles are long, and implementation cycles are even longer, and the "time-to-value" ratio is usually unattainable ideally cripple by the difficulty in establishing causality between software implementations and revenue growth on the one hand or cost savings on the other.
The fact is, when it comes to spending, the majority of the organisations are flying blind. They dive into procurement once or twice a year in a budgeting cycle and then a sourcing cycle. Those cycles are dead because of COVID-19.
These cycles shouldn't be coming back as the crisis has proved that the semi-annual or annual process wasn't near enough to run a modern company, which has forced organisations to look at spending in far more agile ways.
Today, businesses need to shift to an "always-on" approach to manage costs, cash flow, and investments, similar to the software development made from waterfall to agile.
COVID 19 was a test time for Spend Analytics as it has already survived and passed the crises situations in a business, but surviving through a pandemic is what made it a requirement for present day's businesses.
Role of Spend Analytics during COVID 19
All businesses should have long-term goals, and spend analytics can help in realising those goals. However, we just cannot ignore where we are right now. So what is the value of spend analysis or spend analytics amidst a crisis, especially a crisis that has no strict end date at this point?
We have seen that different industries are facing a variety of problems because of the emergency situation raised because of the pandemic. For the medical sector, it is a shortage of PPE. For retailers, it might be a matter of simply holding in place until the lockdown ended. Businesses need to utilise data to recognise those areas where they can cut their own spend mainly discretionary, renegotiate payment terms and cycles, and recognise essential suppliers in order to strengthen relationships.
As per an article published by Forbes, "How COVID-19 Is Changing Spend Analytics," they quoted that "Businesses are seeing analytics and BI as the radar they need to plan and execute strategies essential to their survival."
The article showcases a survey from Dresner Advisory Services which found that "data-driven decision making is a must-have for businesses to survive and grow again." For businesses that have not identified the requirement of gathering and analysing spend data, this pandemic has arrived as a jaw-dropping wake-up call for them.
Understanding and analysing spend has helped companies succeed by recognising levers that help unlock savings and value. What further helps in identifying and implementing strategies or tactics to manage spend during a crisis situation like the pandemic is an effective digital platform or tool that is capable of raising alerts without the need for a resource-intensive process. The fact that many of us have had to work remotely and are still continuing to do so while collaborating with colleagues and suppliers across the world only builds a stronger case for a digital strategy. If you have not considered a digital platform with spend analytics as a part of it, now is the time to do so and it will help you the most.
Applying spend analytics can enable procurement businesses to make better and informed decisions by providing better control over your spending and can help you in navigating crisis situations more quickly and effectively. Spend analysis can enable competitive advantage, enable better supplier relationships, you might even want to see it as the most exclusive secret weapon at your disposal.
One thing that is clear is that improving spend analysis puts companies in the position, during major disruption, to take the necessary reactive steps to answer the immediate need of an hour; but even more important, it also gives businesses the information to identify trends in time to take a proactive approach that positions the company for the future.