![]() ![]() The Methodology for ABC Spend Analysis, involves calculating the spend by supplier, dividing this by the Overall spend, sorted by supplier Total, aggerated into a cumulative spend profile. ![]() Q2.What is Spend Analysis ABC methodology? ABC analysis, used in conjunction with Spend Classification provides spend analysis at multiple levels, creating a spend matrix and sourcing tool to provide the company with the best sourced goods and services. ![]() Q1.Can Supplier ABC Analysis help Identify Opportunities?ĪBC Spend Analysis can help Category Managers Identify Opportunities, by the formation of category spend profiles. Tail spend tends to be unclassified, and therefore ‘invisible’, because the purchases are too small, or too infrequent to go through an organisation’s procurement system. In most organisation, Tail Spend when aggregated can deliver significant cost savings and reduce the amount of transactions. The acquisition of Spend data and subsequent Spend Analysis, provides Category Managers access to a well-structured procurement process, Spend Analysis and procurement metrics are used to create category plans, build supplier relationships, to maintain service levels and deliver the best possible price and aquality for goods and services bought. Spend Analysis and Category Management are very closely aligned, Spend Analysis including ABC, provides the category manager, with spend visibility. Tail suppliers normally have low strategic value and makes the category management, very difficult. Procurement organisations effectively identify and manage suppliers using a sourcing strategy. Effective Spend Analysis and tail spend management, ensures that procurement can focus on creating an optimum and efficient sourcing strategy. Tail Spend Analysis is derived from ABC Analysis, Class A high value suppliers, Tail Spend is formed from class B & C suppliers, equates to 20% of the total spend, B is Mid Tail and C is Long tail. ![]()
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