In brief
Spend analysis is the systematic evaluation of purchasing expenditure by supplier, category and business unit in order to identify potential and risks.
Contents
What is Spend analysis?
Spend analysis creates transparency about what a company spends money on, with whom and through which channels. It is usually the first step towards demand pooling, supplier consolidation and category strategies in strategic procurement.
Data sources are accounts payable, purchase orders from the ERP system, purchasing cards and, where applicable, travel and expense claims. The raw data is cleansed, supplier duplicates are merged and the expenditure is assigned to a uniform category structure. Questions such as these can then be answered: how many suppliers are there per category? What share of the volume falls on the tail spend, i.e. many small suppliers with low turnover? How high is the share of maverick buying, i.e. purchases that bypass the agreed purchasing process or existing contracts?
For MRO, the analysis is particularly revealing because maintenance requirements are often spread across many suppliers, small orders and inconsistent descriptions. It shows which spare and wear parts are bought repeatedly from different distributors, where framework agreements are missing and which suppliers were only set up for one-off cases. A one-off analysis quickly becomes outdated; regular updates make sense.
In practice: maintenance and procurement
For MRO spend, an evaluation down to line-item level is worthwhile, as summary postings often obscure the actual content. A query for suppliers with few orders per year quickly shows where pooling potential lies in the tail spend.
Synonyms and abbreviations: spend analytics · expenditure analysis · purchasing volume analysis · spend cube
Frequently asked questions
What data do you need for a spend analysis?
The basis is data from accounts payable and purchase orders from the ERP system, supplemented by purchasing card transactions and other payment channels. Line-item data with item description, quantity and price is helpful, as invoice totals alone say little about the content. Supplier master data is cleansed beforehand and duplicates are merged.
What is maverick buying?
Maverick buying refers to purchases made outside the agreed procurement process, for example directly by specialist departments without a purchase order, from suppliers that have not been approved or outside existing framework agreements. The consequences are higher prices, a lack of transparency and compliance risks. Spend analysis makes such purchases visible.
How do you classify expenditure in a spend analysis?
Expenditure is assigned to a uniform category structure, either a company-specific one or a classification standard common in the industry. The basis is item descriptions, the supplier's industry and general ledger accounts. Assignment is partly rule-based and partly manual and should be reviewed regularly so that analyses remain comparable.
What are the benefits of a spend analysis for MRO?
It shows how many suppliers deliver maintenance requirements, which parts are bought repeatedly from different distributors and how high the share of small individual orders is. This gives starting points for pooling, framework agreements, supplier reduction and better master data quality for spare parts.