“Analysis is the art of creation through destruction.”
(P. S. Baber)
Why is Procurement Analysis Important for Your Business?
Procurement is one of the most significant departments in your company. Actually, the success of the whole company often depends on the effectiveness of its Procurement department. For this very reason, it’s necessary for you to analyze your procurement process regularly and timely. This way, you’ll be sure your procurement activities meet the goals set in your strategy and your money is spent exactly as you want it to be spent. Regardless of the size of your company, procurement analysis is the key activity for managing business successfully. In order to help you organize and track your procurement activities, we bring you the list of procurement segments you need to analyze systematically, as well as constantly track their performance:
Speaking of Procurement functions in the company, the first thing that comes to our mind are financial factors, so we decided to start with them. Procurement saves your money mainly through reducing costs of goods or services purchased, so the first analysis we need to perform is the analysis of prices obtained in the procurement process. However, the price of goods or services is not the only cost we can find in our procurement process – for example, transportation, handling and warehousing costs are costs that surely mustn’t be neglected.
The next thing you need to analyze in your Procurement department is your inventory. When conducting this analysis, it’s important to analyze the cost of storing the items, but also, on the other hand, the costs that may arise as a result of a shortage of goods needed for production or sale. Inventory analysis gives you insight into current inventory status, which helps predicting the amount of goods that must be ordered more accurately. This way, you won’t encounter production delays on one hand, nor overload of warehouses on the other. This analysis is very important for businesses because it helps you planning and ensuring a contiguous business stream without major oscillations in productivity.
Conducting supplier analysis is another thing important for the success of your business. Except for the evaluation of conditions, prices and types of goods or services they provide, this analysis is key for building strategic relationships with your suppliers. Quality relationships with your suppliers can significantly affect quality and costs of delivered goods and services, as well as improve supplier’s efficiency.
Delivery Time Analysis
Delivery time is also a very important part of the procurement process. Let’s take procurement of large or perishable goods as an example. For perishable goods, it’s clear that it’s crucial to have them delivered as quickly as possible, because if not delivered on time, such products become unusable. Considering large products, it’s very important to have them delivered within an exactly defined timeframe, so all the requirements for their acceptance can be ensured. It’s necessary for both types of goods to ensure you have enough storage space and staff to handle them, so it’s very important to cooperate with reliable suppliers that will meet deadlines agreed. This analysis will not only help you in segmentation of suppliers, but also in avoiding unnecessary and unforeseen costs.
Maverick Spending Analysis
In case the Procurement department has to depart from the plan, you can easily find yourself in the situation where goods or services ordered are not appropriate for your business or the price you paid for them is much higher than it would be in case the purchase was done through negotiations or auctions. Furthermore, it can happen that quality of products procured this way is lower than usual or an item is purchased from one supplier, while another could have been cheaper. Analyzing all your procurement requests, including the ones placed ad hoc, gives you insight into data important for avoiding contingencies in the future and identifying situations that could cost your business far more than needed.
The procurement process requires sticking strictly to predefined plans and constantly analyzing past activities in order to plan the future better. Ensolva, as a complete software solution for procurement, provides insight into all segments listed above, as well as into many more we didn’t have the opportunity to mention. Be ahead of the competition and analyze your procurement process. You will see how much time and money you can save by only analyzing your procurement process regularly, as an integral part of your business process.