PurchTips - Edition # 126

 

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Picture of Charles Dominick, SPSM, SPSM2, SPSM3

Spend Analysis: Whatcha Looking For?

By Charles Dominick, SPSM, SPSM2, SPSM3

How Can Spend Analysis Contribute To Savings?

Simplified, spend analysis is the systematic review of historical purchase data. The output of a spend analysis is a summary of purchases by various variables, such as category, supplier, and/or business unit.

The primary reason for conducting spend analysis is to identify opportunities for cost savings. When you look at the output of a spend analysis, there are at least four indicators that there are opportunities for cost savings:

Indicator #1: A large amount of spend in categories for which enterprise-wide contracts do not exist. Today's educated purchasing professionals can apply best practices (e.g., strategic sourcing) so that their companies minimize cost. However, when these best practices have not been utilized in a category or purchase decisions are left up to non-purchasing professionals, there is a likelihood that the company is overpaying for goods and services. So identifying areas where Purchasing should be more involved in getting contracts for those categories is a sound strategy for cost savings.

Indicator #2: A significant Purchase Price Variance (PPV) for a high-spend item or category. PPV is the difference between the average price paid and a standard cost. When there is a large PPV, this indicates one of two things: either your standard cost is not valid or you are paying too much. In the latter case, you should consider taking some type of action, such as negotiating or sourcing, to ensure that you are paying a fair price.

Indicator #3: An unusually large number suppliers for the money spent in that category. Purchasing 101: the more you buy from a single supplier, the better discount you'll qualify for. If you're buying from too many suppliers, you're not leveraging your volume and likely not maximizing your discounts. Seeing a large number of suppliers in a category can tip you off that supplier consolidation can deliver savings to your organization through price reduction and also through the more advanced benefits of an optimized supply base.

Indicator #4: Rising prices over time. If you're paying more year after year, you simply need to pay more attention to the purchases in that category. With no one "minding the store," price creep is likely to set in.

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Spotlight On Professional Development Opportunities

SPSM Certification

Are you tired of not getting enough opportunities, respect, and money out of your purchasing career? Well, guess what? Nothing will change unless you take action towards becoming a world-class purchasing professional.

You see, today's employers refuse to reward employees for yesterday's skills.They demand that purchasing professionals like you use the most modern skills and achieve unprecedented results. They want you to save more money, achieve better operational performance, and reduce risk.

Is lacking a purchasing certification keeping you from getting the results, opportunities, respect, and money that you want out of your career? Today's employers refuse to reward employees for yesterday's skills. They want you to save more money, achieve better operational performance, and reduce risk. They demand that purchasing professionals like you achieve unprecedented results and without the most modern skills that can be a challenging feat!

So how can you acquire the most modern skills, achieve meaningful results, and convincingly prove your capabilities to today's employers? There is an impressive purchasing certification program that will teach you what you need to accomplish all of this and more. It is the SPSM® Certification, earned by completing the Senior Professional in Supply Management® Program. And you could earn it in less than a year - maybe even much less than a year!

Earning your SPSM® Certification by completing the Senior Professional in Supply Management® Program is the action to take if you want to bring the most modern purchasing practices into your organization and achieve your career potential. Learn how to earn your SPSM® Certification (and perhaps get an iPad) (with the option of getting a Study Guide on an iPad) at:

Distinguishing yourself as an achiever in purchasing is key to sustaining a rewarding career, even in these difficult economic times. Earning your SPSM® Certification by completing the Senior Professional in Supply Management® Program is to take if you want to bring the most modern purchasing practices into your organization and achieve your career potential. Learn how to earn your SPSM® Certification (and perhaps get an iPad) at:

Earning your SPSM® Certification by completing the Senior Professional in Supply Management® Program is the action to take if you want to bring the most modern purchasing practices  into your organization and achieve your career potential. And if you sign up for the Senior Professional in Supply Management® Program on or before May 31, 2008, SPSMSM Certification Program on or before 4/30/2007, you also get these and other bonuses valued at over $700:

  • FREE $30 gift certificate to Amazon.com!
  • FREE CD-ROM with printer-friendly versions of the class materials!
  • FREE Purchasing Performance Measurement spreadsheet template!
  • FREE audio CD about purchasing job security!

To learn how to earn your SPSM® Certification and get these valuable bonuses, visit:

Earning your Senior Professional in Supply Management® (SPSM) Certification is the action to takeif you want to bring the most modern purchasing practices into your organization and achieve your career potential. Learn how to earn your SPSMSM Certification at:

Learn how to earn your SPSM® Certification at:

www.NextLevelPurchasing.com/spsm.html

The Latest Purchasing News

  • Are you a purchasing manager who worries about balancing the many demands of your leadership role? Next Level Purchasing has just launched a new online class, "Expert Purchasing Management," to help you. Learn more about Expert Purchasing Management at www.NextLevelPurchasing.com/expert
  • Considering a career move? Since the last edition of PurchTips, at least four jobs preferring candidates with the SPSM Certification have been posted at www.NextLevelPurchasing.com/jobs

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Want to learn more about today's topic? Then watch my interview in our latest video podcast! Video podcasts are pre-recorded shows that you can watch on your computer or iPod. Our Purchasing & Supply Management Podcast Series® is one more way for us to help you have a rewarding career!

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This Starter Kit gives procurement professionals like you a clear idea on what it will take to become certified. You'll get an excellent feel for what you will need to learn and how long it will take.

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Included in your free Starter Kit:

  • Access to two lessons from courses that are part of the Senior Professional in Supply Management® Program
  • A Certification & Training Planning Template
  • Case studies
  • A free Basic Membership in the NLPA

Together, these materials will help you decide how well the SPSM® Certification can help you achieve your career goals.

So, what are you waiting for? Begin your pursuit of a more rewarding procurement career – get your Procurement Training & Certification Starter Kit now by signing up for a free NLPA Basic Membership!

If you are already a member of the NLPA, click here to login and visit the "Starter Kit" tab to access these resources.