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Data Collection and Spend Analysis

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Once you identify the need for Strategic Sourcing, the next step is collecting and analyzing spend data. The purpose is twofold. First, you need this data to determine where you should focus your efforts. Your resources are more than likely limited, and it will not be possible to immediately reduce costs across all of your organization's spend areas. You need to identify areas of opportunity and develop a project road map to provide context and timelines for your efforts.

Second, you need these data to determine both the quantitative and qualitative requirements associated with a particular spend category. When we discuss the quantitative aspects, we are referring to current price points, discounts, payment and freight terms, and other costs associated with a particular area of spend or specific suppliers. Qualitative requirements refer to the quality and services tied to these costs. The current suppliers were more than likely chosen based not just on price, but other value‐added considerations as well, and these factors need to be understood and considered. The quantitative baseline and qualitative requirements become the launching pad for the rest of the engagement, which makes it critical not just to identify them, but also to make sure they are agreed on by other interested parties within your organization before moving to the next step.

Managing Indirect Spend

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