CENGAGE LEARNING
MONCZKA HANDFIELD GIUNIPERO
PATTERSON
Overview
Spend
Spend
What is spend?
Payments to outside entities where an
exchange occurs
Includes direct (COGS) and indirect costs,
custom duties, utilities, & administrative costs
Does not include employee pay, income tax,
depreciation, and other non-exchange costs
Spend Analysis
Definition
Summarization of purchases across
within spend categories
or
Purpose
Understand values & patterns in supply
Reveal strengths or weaknesses
Identify spend categories requiring strategic plans
Analysis vs Strategy
Refer back to CSR template;
Of ~15 total pages, the analysis piece
is 5-7 pages, the bulk of the work
Combining the Supply Mgmt Situation
analysis (internal & external) and the
Category Analysis defines your Strategy
Dont get ahead of yourself; analyze
first, then develop strategy
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Evaluating Spend
Did the business receive what was paid for?
Did the suppliers charge an accurate price?
Where to combine volumes & standardize
purchases?
Million $
# of Suppliers
10
Example: Spend/Supplier by
Commodity
$6,000
$5,000
Spend/supplier (Million $)
$4,000
$3,000
$2,000
$1,000
$0
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13
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Conclusion
Spend represents a cost, but also an
area of value & opportunity
Analysis should simplify & increase your
understanding of realized value of
inputs and potential savings
Spreadsheet tools useful, but key is
getting accurate data (in God we trust )
Then define your action plan for category
strategies
Purchasing & Supply Chain Management, 5e
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