Goods Spend Analysis

Assignment #1 (Module 2)

Name: Yasser Hammoud ID#: 2002659 Course : Procurement and Supply Management Instructor : Brian Fleming Date: January 18, 2012

#1. In order to conduct a goods spend analysis for my organization, the following steps must be taken in the initial phase of this project: a. Corporate Buy-in: Despite its benefits in terms of cost savings, repetitive functions and improved customer service, the top management may not be willing to undergo such change and therefore, such issue must be addressed at the high executive level. Management should be convinced through motivation and education who in turn will lead others to accept and realize the importance of the goods spend analysis for their organization. b. Staffing: Once the organization is convinced that goods spend analysis is vital for the organization as a whole and in fact is a requirement rather than a choice, then a designated team should be formed and responsibilities should be assigned. Team members must give this project a serious consideration and should be professional, experienced and result oriented. c. Realistic Goals: Setting a realistic goal for the good spend analysis team is a challenge. The team leader along with all team members should clearly identify their objective of what they want to achieve as a result of their mission. Once the objective is identified which will be: cost savings and administrative efficiencies then the team should design a road map on how to reach their goal. d. Data Management: In order to reach their goal and achieve accurate results, the team must prepare a reliable data base of information. Therefore, before the initiation process, the team must extract, validate, cleanse, classify, enhance and classify data. By managing and preparing the data in such way, then the team will be ready to start the analysis process without any issues regarding data and ultimately reach their goal of strategic sourcing based on the validity of the information available to them and consequently a lower product cost, higher product quality and

more efficient supply chain process within the whole organization. A challenging part of preparing integrated data that the company could face is when procurement for the same product is done in multiple locations or branches without proper coordination among supply chain operators within the same organization. In such case, the goods spending analysis team will require more time, efforts and higher expenses in order to import and consolidate data which to be used for the analysis. e. Communications and Reporting: The team must generate precise and meaningful reports to the appropriate authorities within the organization by highlighting important information on spending who in turn will make strategic sourcing decisions which will lead to new contracts awards and monitor compliance. Reporting period should also be decided by the executive team based on the complexity of the business and its nature as well as their operational and future plans. #2. Specific key triggers for suppliers and their importance for the goods spend analysis team should be highlighted and given a great emphasis. Such triggers could be one or more of the following list of concerns: a. High dollar value of commodities or services. b. High number of transactions for commodities or services. c. High dollar value for suppliers. d. High number of transactions for suppliers. e. High dollar value for internal customers. f. High percentage of sole source for any commodities, services, suppliers or customers. The common denominator among the above triggers is the word high which clearly indicates that

the goods spending analysis team must focus their efforts on anything that is high in terms of value, volume, frequency and quantity relative to other spending within the same time frame. Therefore, I have chosen such triggers to be the basis for the analysis. #3. Since the ultimate objective of any organization is to lower production cost or services and achieve a better quality customer service through a more efficient supply chain then a good quality goods spend analysis will help the organization accomplish that by identifying and analyzing important spending triggers. For instance, If one of the triggers was a high a number of transactions for a certain commodity or service from multiple suppliers, then the company will have the opportunity to reduce cost through volume discount from a sole or fewer suppliers. In addition to lowering product cost, the company will run more efficient due to less repetitive administrative duties and a leaner supply chain process.

Furthermore, by effectively utilizing and analyzing goods spend analysis, the firm will consequently reduce cost and achieve better quality products and services just by leveraging its bargaining position in the market place and therefore, be more competitive. Cost reduction along with higher supply chain efficiencies are the final outcome of the whole process. This positive final outcome is compatible with our current procurement strategy of supplying the market with high quality product and services at lower costs.