Please click here and here for previous posts in this series. This series of articles is based on insights from the following Spend Matters Perspective: Spend Analysis -- Making Quantum Leaps: Exploring the Realm of Possibility and Untapped Savings with Three New Strategies.
In looking at the impact good data -- and analyzed good data! -- can have on contracting and supplier development initiatives, it's important to understand, just to use one example, how a lack of validation of rate cards and checking of invoices leaves an organization at risk on pricing. But in all cases, the aim should not be just to recover overcharges through analysis -- the key is to discover the underlying reasons for the discrepancies, and to ensure that the vendor is able to adhere to the agreed pricing in future. In this process, it is essential to make sure that the procurement resources leading the charge have access to the right level of detail and that rate card SKUs match invoice data.
In certain cases, it is important to have information for both product and service components of a category if both are included in contract or master outline agreement. If you are buying a bundle of items with a mix of products and services, you need to validate the full bundle. Individual items may be in compliance, while the bundle can be out of compliance. For example, an "equipment repair" item might contain both the services and the parts for the repair. An error might be to have one service with two sets of replacement parts. The unit prices might all be correct, but the relative mix is wrong.
In short, it is essential to look at the entire dataset using a spend analysis (or similar) tool and cube environment to permanently change contracting and supplier behavior. Such tools make practical the analysis of hundreds of thousands of line items, whereas ordinary spreadsheet analysis will fail to deliver sufficient insight.
For further information on the topic, you can download the Spend Matters Perspective: Spend Analysis -- Making Quantum Leaps: Exploring the Realm of Possibility and Untapped Savings with Three New Strategies.