Step Three: Examine data quality and identify an effective data management process A considerable number of purchase orders or purchasing activities are not electronically transmitted in the company therefore the accuracy of purchasing records must be examined.
In order to obtain complete, accurate, and consistent data, all stakeholders should identify an effective data/record management process to ensure accuracy.
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Step Four: Create a proper classification schema It’s very unlikely that the company will adopt an automated spend data management system designed for spend data extraction, cleansing and classification process. The spend analysis team will have to determine how to group spend data around distinct commodities with the concept of strategic sourcing in mind.
Spend data should be categorized at the item level, providing visibility and allowing comparisons of detailed attributes across suppliers and commodities. Step Five: Implement spend analysis reports on a monthly basis The monthly spend analysis reports should highlight the top suppliers, internal customers, commodities receiving spend. Other reports addressing accumulated savings and process improvement should also be implemented and shared with other stakeholders for the purpose of involving them in advanced sourcing plans.
Reporting will provide a high visibility into spending and help develop a cost-saving model to be used in strategic sourcing. Specific Key Triggers The company has a high percentage of single sourcing for direct commodities as they have signed contracts with the suppliers in Asia who manufacture different product lines for them. They have negotiated low rates for the products that will be manufactured and shipped to Canada and then directly distributed to customers (mainly retailers and gift stores).
Since the company has a large customer base instead of a large supplier base, the key triggers to be considered for focus are high dollar value of direct goods or product lines, high dollar value of make-to-order for customers, high dollar value of indirect goods for internal customers, and high number of transactions of indirect goods for internal customers. Procurement Strategy and Spend Analysis All the products must pass safety and lead testing in Canada before selling and distribution.
The procurement strategy the company currently employs is low cost with standard quality. The goods spend analysis recommended in this essay will work well with the company’s procurement strategy. It is true that the company is struggling to reduce costs and cut spending at all levels, however, they cannot afford sourcing products with lower quality as the spending on inspection and disposal will dramatically rise. In order to monitor and manage spending properly, strategic spend analysis is the only effective tool they can use to achieve the goal.
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