1/8/2015 SpendAnalysisI:TheValueCurve|SourcingInnovation

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SpendAnalysisI:TheValueCurve

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TodayIdliketowelcomeEricStrovinkofBIQwho,asIindicatedinmyTheresNoSpendAnalysisWithouttheSliceNDicepost,isgoingtobeauthoringthefirstpartofthisseriesexaminingwhatisrequiredforatruespendanalysissystem,spendanalysis2.0ifyouarepartofthe2.0movement,asopposedtojustabasicspendvisibilitysystem.

SpendAnalysishasalwayssufferedfromwhatthelateBritishhumoristStephenPottermighthavecalledtheSoWhatDiathesis.Inotherwords,nowthatyouhaveyourspendingloadedandclassified,whatnext?Well,ifyouveneverseenyourpurchasingdataloadedintoaspendanalysissystem,youreinforatreat,becauseyoucanfindsavingsopportunitiesjustbydrillingaround.Itsoftenthateasydrillaroundfindopportunities.

However,oncethelowhangingfruitisharvested,whichcantakeanywherefrom6to12months,thevalueofthespendanalysissystemdeclinessteeplyatwhichpointMr.Pottersobservationcomeshometoroost.Asillustratedbelow,thereisamomentatwhichthecostofthespendanalysissystembeginstoexceeditsongoingvalue.

1/8/2015 SpendAnalysisI:TheValueCurve|SourcingInnovation

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Itisshortlyafterthistimethat(1)usageoftheproductdropstolowlevels(2)therestoftheorganizationbeginstoquestionthevalueofthesoftwareand(3)stakeholderscomeunderpressuretojustifycontinuedhighexpenditures.

ThatswhyitsoddtohearpeopletalkaboutTheSpendingCubeincapitallettersasthoughtherewereonlyonedatacubeevertobebuilt.Actually,therearemanydifferentwaystolookatspend,andthereslotsofspenddatathatsimplycantbeorganizedintoasingledatacubeanyway.Howaboutacompliancecube,orientedaroundinvoiceleveldata?Apurchasingcardcube,specifictopcardidiosyncrasies?AT&Ecube,builtfromtravelagencydataonbestpriceversusactualprice,trackingemployeetravelandthereasonsforthediscrepancies?

Infact,itsobvioustoanyonewhohasworkedwithmultipledatasetsattheA/P,PO,andinvoicelevelthattherearemany,manydifferentkindsofdatatoanalyze.Eachdatasetaddressesmoreopportunity,andpresentsanotherchancetoapplyasophisticatedanalysistool.Someofthesedatasetsarentspendingdatasetsatall,butconsistofdemandsideinformationforexample,cellphoneorfleetvehicleusagerecords,oroperationaldatasuchasequipmentrecoveryandmaintenancelogs.

Ifaspendanalysissystemmakesiteasytoloaddataandcreatenewdatasets,whichitshouldandifthesystemsupportsasmanydatasetsasyoudlike,asitoughtthentherereallyisntanylimittohowoftenthesystemcanbeused,ortohowmanydifferentkindsofdataitcanbeapplied.Whichmeansthatafullutilizationspendanalysissystemvaluecurvelooksmorelikethis:

1/8/2015 SpendAnalysisI:TheValueCurve|SourcingInnovation

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Inotherwords,eachuseofthespendanalysissystemprovideshighinitialvalue,aswellasresidualvaluebutthesystemisusedagainandagainfornewsetsofdata.Thevalueofthespendanalysissoftwarethereforeremainshighovertime.

Nextinstallment:ThePsychologyofSpendAnalysis