How can you map your purchasing in 9 steps to improve your company's performance?

Introduction

The mapping of purchasing expenditure can help a company improve its performance by identifying opportunities to optimise and rationalise expenditure. This is a process that consists of identifying the costs associated with the various departments of the company and classifying them according to their importance. To be effective, it is important to follow a number of best practices and be methodical.

Key functions involved in procurement mapping

This process is often carried out by management control and purchasing. They are by nature responsible for collecting and analysing data to identify opportunities for optimisation and rationalising expenditure.

It may also involve other departments such as general services and resources, communications, information systems and human resources.

The benefits of mapping purchasing expenditure

Mapping purchasing expenditure can bring a number of benefits to a company. According to a study by Spend Matters, companies that map their purchasing spend can achieve an average reduction of 12% in their total spend. It helps to :

1. Become aware of the company's cost items. Most of the time, Business Departments do not have complete control over their expenditure. This in-depth analysis gives them a clearer picture of what they are actually consuming, and can lead to significant savings.
2. Identify unnecessary costs or excessively high expenditure in certain categories. This can also help identify opportunities for optimisation, and initiate tendering procedures or direct negotiations.
3. Massify expenditure and rationalise the supplier panelr
4. Helping to improve transparency of expenditure and strengthen collaboration between the various business functionsIt can also strengthen trust and collaboration with suppliers. It can also strengthen trust and collaboration with suppliers, as the information shared is clearer and more transparent.
5. Benchmark to gain a better understanding of the price positioning of different suppliers in a given category and have an initial qualitative assessment of suppliers.

Some examples of costs to be controlled by department

• Services and general resources : These may include costs relating to the use of premises, office equipment, office supplies, security systems, etc.
• Communication : These may include costs relating to advertising, marketing, public relations, etc.
• Information Systems Department : These may include costs associated with the purchase of IT equipment, maintenance of IT systems, IT training for employees, etc.
• Human resources : These may include costs relating to employee training, recruitment and talent management, temporary staffing, etc.

The 9 steps to mapping purchasing expenditure :

To map purchasing expenditure, it is important to determine the most appropriate methodology for the company. This may involve setting up systems to track expenditure and costs, as well as using various reporting tools to visualise the data.

Here are a few steps to follow:

1. Establish a clear objective for mapping : It is important to determine the objectives of mapping for the company so that expenditure and costs can be assessed more effectively. The central question will be: "Where should purchasing be positioned to be effective in my short, medium and long-term strategy?
2. Establish a methodology :
   1. Establishing clear governance with players who have the necessary level of knowledge and are capable of bringing the approach to fruition within a reasonable time
   2. Work closely with the various operational departments to obtain a complete view of all expenditure. For example, with a few exchange workshops to collect operational practices.
3. Collect the data It is important to collect data on all the company's costs with the suppliers concerned, then establish a pareto and classify by size of expense.
4. Analyse the data to identify trends, certain uses, etc. and identify opportunities for optimisation and rationalisation. It will be important to focus on the most important and strategic expenses for the company.
5. Carry out the contractual analysis in order to understand the possible constraints and levers. At this stage, you will be able to propose quantitative and qualitative analyses.
6. Use visualisation tools to represent the data.
7. Share your results. The results of the mapping must be shared with the company's management so that everyone can understand the challenges and opportunities for optimisation.
8. Implement an action plan based on prioritised purchasing projects based on financial and strategic issues, feasibility of projects and cost savings,
9. Define a monitoring system for this action plan to measure the impact of actions taken and monitor progress.

Conclusion

Companies can improve performance by identifying opportunities to optimise and rationalise expenditure.

Management control and purchasing are the key functions involved in this process, and their collaboration is essential to achieve the best results. To make the most of the mapping of purchasing expenditure, it is important to have finance and purchasing business expertise coupled with a mastery of the data.

A comprehensive approach is preferable to a cost killing which may have short-term benefits. However, it could obscure many of the parameters and contextual elements necessary for the stability of the company. However, it could obscure many of the parameters and contextual elements necessary for the stability of the company.

At XTEP and A&A Associés, we are proud to be a leading data BI partner and informed purchasing experts in mapping purchasing expenditure across all 9 stages.

Contact us to find out more and to help you better understand how to optimise your purchasing costs and profitability!