Many businesses are losing millions through the corporate procurement process because they fail to have clear insights into what they are buying, for how much and from whom. According to leading analysts such as Aberdeen Group and AMR Research, most organizations can save about 2 percent to 6 percent (or even more) of their total spend by identifying low-hanging cost savings opportunities such as rationalizing the supplier base, eliminating purchase price variance between facilities or improving contract compliance by providing clear visibility into their spend. For a typical manufacturer to show a similar increase in gross margin to what it might see by analyzing its spend, it would need to show a 15 percent increase in revenue.
However, in order to identify where to focus and what the opportunity for cost reduction might be, one first needs to have visibility into current spend across various dimensions--by division, by category, by business unit and by suppliers. Only then can you identify and prioritize such cost-reduction initiatives. Without it, you are shooting in the dark in terms of where to find the low-hanging opportunities.
Source: Inside Supply Management